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Fineman v. Armstrong World Industries

filed: October 28, 1992; As Amended November 3, 1992.

ELLIOT FINEMAN; THE INDUSTRY NETWORK SYSTEM, INC. APPELLANTS
v.
ARMSTRONG WORLD INDUSTRIES, INC.



Appeal from the United States District Court for the District of New Jersey. (D.C. Civ. No. 84-03837)

Before: Stapleton and Mansmann, Circuit Judges, and Fullam, District Judge.*fn*

Author: Mansmann

Opinion OF THE COURT

MANSMANN, Circuit Judge.

In a civil action brought in the United States District Court for the District of New Jersey, an entrepreneur, Elliot Fineman, and his corporation, The Industry Network System, Inc. (TINS), sought to recover against Armstrong World Industries, Inc., a prominent manufacturer of floor covering products, for losses sustained after TINS folded. Conceived in late 1983, the TINS concept employed novel video technology to produce a monthly videotape magazine for retailers of floor covering products to be sold through distributors. Fineman contended that Armstrong, anticipating the launching of its own videotape network, interfered with TINS' prospective contract with an Armstrong floor covering distributor to distribute the TINS video magazine. As a result of losing this contract, TINS lacked the cash flow necessary to continue in business and folded. Fineman, formerly an industry consultant, allegedly suffered injury to his reputation that destroyed his consulting business. Additionally, Fineman and TINS asserted that Armstrong, a leading manufacturer of resilient floor coverings, coerced its distributors to refuse to deal with TINS by employing its alleged leverage in the resilient floor covering market to eliminate TINS and to gain a competitive advantage in the secondary market of videotape magazines. Having cleared from the field an early competitor, Armstrong prepared, according to Fineman, to enter the videotape magazine market unencumbered by competition.

Armstrong argued in defense that TINS' opportunities for success were specifically limited by its allegedly inferior product, high pressure sales tactics or poor business projections. In general, Armstrong implied that the risk inherent in starting any small business is further heightened in the magazine industry, where start-up costs and barriers to entry are low and competition is, consequently, stiff.

The jury agreed with TINS and Fineman, rendering a verdict for them on the tort and the antitrust claims, including the imposition of punitive damages. The district court, in part assessing the strength of the evidence differently, granted judgment notwithstanding the verdict,*fn1 and in the alternative, a new trial.

With respect to the judgment n.o.v., the parties dispute whether the plaintiffs have proven their tortious interference claims, are entitled to punitive damages on that claim and whether Armstrong exercises monopoly power in the resilient floor covering market, a prerequisite to TINS' Sherman Act section 2 claim. They also contest the district court's grant of a directed verdict for Armstrong on TINS' section 1 claim, specifically, whether the meeting of the minds required to establish a claim of concerted action under section 1 of the Sherman Act requires a shared motive. Finally, TINS challenges the grant of summary judgment to Armstrong on TINS' contract claim, disputing Armstrong's obligations under the 1984 TINS-Armstrong Settlement Agreement. We will address the judgment n.o.v., new trial, directed verdict and summary judgment orders in that sequence.

I. Jurisdiction

The district court exercised subject matter jurisdiction over the Sherman Antitrust Act claims, 15 U.S.C. §§ 1 and 2 (Counts 1 and 2), and pendent jurisdiction over the remaining state law claims: breach of contract (Count 3); tortious interference with contract under New Jersey law (Count 4); New Jersey antitrust claims (Count 5) and Armstrong's counterclaim averring that the plaintiffs engaged in civil conspiracy.

We exercise appellate jurisdiction over the final order of the district court granting judgment n.o.v. for Armstrong on the tortious interference, Sherman Act section 2 and New Jersey antitrust claims; dismissing Fineman's individual monopoly claim, the Sherman Act section 1 claim, the breach of contract claim, and Armstrong's counterclaim; and alternatively granting a new trial on the tort and section 2 claims.

II. Facts

A. The Parties

A brief introduction into the structure of the floor covering distribution scheme, and Armstrong's specific characteristics, will serve as useful background for understanding the discrete conflicts at issue here. Later, we will detail the facts relevant to each legal issue. A thorough review of the record is necessary because this appeal is so fact specific. The following recitation reviews undisputed facts or casts the facts in the light most favorable to the verdict winners, the plaintiffs.

Floor coverings are distributed to retailers from manufacturers through distributors, also known as wholesalers. Floor covering distributors may often be "captive" to their manufacturers, carrying only that manufacturer's line of one particular product. This is frequently the case with Armstrong's distributors of its resilient floor coverings. This captivity appears to be limited to product lines; thus, a distributor may carry only Armstrong's resilient line but a different manufacturer's carpet or ceramic tile line. For purposes of this opinion, an "Armstrong distributor" denotes a distributor that is "captive" to Armstrong for its resilient line but may also carry non-Armstrong non-resilient lines. It also bears emphasis that Armstrong does not possess any ownership interest in its distributors. On this record, a typical Armstrong distributor depends upon Armstrong for 95% of its resilient business*fn2 but 50% of its overall business.

By contrast, retailers, who range from "mom and pop" outfits to chain floor covering retailers to other retailers that carry floor covering as a sideline, e.g., furniture, hardware, wallpaper and paint stores, and lumberyards, generally carry various brands; they purchase floor covering products from competing distributors. Depending upon the manufacturer and the specific product line, retailers may choose to buy from distributors competing within the same manufacturer's product line. Armstrong, for example, promotes intrabrand competition for its resilient line by supplying resilient to multiple distributors within any given territory. Thus distributors vigorously compete for retailer loyalty, floor space and displays, in large part because they have very little flexibility in pricing their products. Distributors vie for sales by offering "specials" or "promotions" on items, which are frequently financed by the manufacturers. In addition, some retailers purchase directly from manufacturers, although Armstrong deals exclusively through its distributors.

1. Armstrong World Industries, Inc.

During the relevant 1983-1984 time period, Armstrong World Industries, Inc., manufactured both carpet and resilient floor covering products.*fn3 "Resilient" is the industry name for vinyl floor coverings, manufactured in either sheeting or tile form, and most commonly identified with the brand name "linoleum." Resilient constitutes only one of many types of "hard" floor coverings, including wood, ceramic tile, and natural floor coverings such as stone and marble. In industry jargon, "hard" floor coverings are distinguished from "soft" floor coverings, familiarly referred to as carpeting.

Armstrong's dual corporate structure flowed from its two floor covering products and consisted of twin carpet and resilient divisions. At the regional level, each division maintained its own district managers and sales force. During the relevant time period, Robert Roth served as the New York area district manager for Armstrong's resilient division and Robert Guzinsky was Roth's counterpart in Armstrong's carpet division. These men appear to have had little horizontal contact, except, for example, when a distributor carrying both lines required some financial counseling or advice from its respective district managers.

At the distributor level, however, one significant difference between the two Armstrong divisions is apparent. Armstrong sells to any number of resilient distributors within a defined geographic territory, which fosters keen competition among Armstrong's own distributors as well as with other manufacturer's distributors. Armstrong's carpet division, on the other hand, grants exclusive territorial rights to each of its carpet distributors, thereby insulating them from intrabrand competition.

2. Elliot Fineman and TINS

Elliot Fineman began his career in the floor covering industry in 1963 as a salesman for a New York area carpet retail company, Benjamin Berman. During his fourteen year tenure at Berman, in which he worked his way up to the position of president, he developed a unique inventory control system. J.A. at 1565-7; 6398-6404. In 1977, Fineman left Berman to start a consulting business, Cost-Free Internal Profits Systems (CFIPS), largely premised on this inventory control system. As Gail Farrer, a TINS principal who followed Fineman from Berman to CFIPS explained, CFIPS aimed to achieve increased profitability from inside a floor covering distributor's company by reducing inventory and the costs associated with maintaining an excessive amount of inventory. J.A. at 3359-60. Fineman explained that a distributor's profits are a matter of pennies on the dollar so that reducing the cost of maintaining inventory could be quite profitable. Fineman testified that CFIPS charged an average consulting fee of $200,000 and guaranteed its client's satisfaction. J.A. at 1587-90.

In 1982, Fineman originated the TINS concept, a monthly magazine in the form of a videotape targeted to floor covering retailers. After conducting market studies confirming support for the idea, he launched the TINS magazine in August 1983. J.A. at 1646. The TINS magazine included four regular segments: 1) a journalist's report on industry trends; 2) Fineman's interview of an expert on key business topics; 3) Farrer's segment highlighting a successful retailer and its tips for success; and 4) the distributor's "tag," a personalized segment in which each distributor would communicate with its retail customers. The advantage of the tag lay in offering promotions, or discounted specials, to the retailer. Retailers typically were supplied by several distributors, so that those offering retailers additional promotions could expect to reap a competitive advantage. According to Fineman, the tag also reduced overhead costs associated with promotions because it enabled distributors to reach their retailers efficiently and simultaneously, and eliminated the need for individual visits to each retail customer.

Fineman's corporation, The Industry Network System (TINS), marketed its monthly video magazine to floor covering retailers through their distributors. TINS conducted sales training for each distributor prior to "launching" an intensive four to six-week sales effort by that distributor's sales force. In exchange for paying a marketing rights fee to TINS, these distributors were promised commissions or royalties based upon subscriptions and video equipment sold.*fn4 In addition, Fineman assured the distributors that their tags would generate increased sales without additional overhead, thus yielding substantial "incremental profits."

Because Armstrong distributors typically employ more salespersons than distributors of other floor covering products, TINS especially targeted them as its distributors. TINS asserts that signing up Armstrong distributors for TINS was critical: in addition to being a leading manufacturer of resilient, Armstrong distributors typically maintain a sales force specialized in selling only Armstrong products. For this reason, Armstrong distributors by and large employ more salespersons than non-Armstrong distributors, ensuring TINS access to a greater number of retailers through Armstrong distributors.

TINS successfully signed up two Armstrong distributors. When a third prospect voiced concern that Armstrong might not approve of TINS, Fineman contacted Armstrong's Lancaster, Pennsylvania headquarters and on September 7, 1983, spoke to James Humphrey, Armstrong's general manager of Sales and Marketing for the Floor Division, to explain the TINS format and its potential for Armstrong distributors. See J.A. at 7518 (Humphrey's handwritten notes of conversation outlining TINS format and naming distributors contacted). Fineman testified that at this time he was unaware of Armstrong's plans to enter the video market but he later learned that Armstrong was several years behind TINS in the development of a video network. J.A. at 1898-1901.

Humphrey voiced four concerns about TINS to his superior, Dennis Draeger, Armstrong's vice president of floor covering operations. First, TINS' offers of exclusive territory to distributors might conflict with Armstrong's policy of not favoring any single distributor within a geographic area, or maintaining a "level playing field" among its distributors. Second, Humphrey believed that involving Armstrong's distributor's salespersons in selling TINS would interfere with Armstrong's strong preference for maintaining specialized sales forces. Third, the TINS magazine would highlight many products that competed with Armstrong's. Fourth, Armstrong voiced concern over equipment incompatibility. It had plans for a video program that would employ Sony "Betamax" equipment whereas the TINS magazine used a VHS format. J.A. at 3735-36.

Subsequent to this telephone call, Humphrey disseminated the following memorandum to Armstrong's Floor Division District Managers on September 12, 1983:

There is a possibility some of your wholesalers might contact you regarding a new video based retail floor covering communication program being introduced called "TINS." The program is being presented to independent wholesalers throughout the country for sale to floor covering retailers in specific territories. The objective is to establish a network of retailers who will utilize various video based programs on a monthly basis. The system would also allow for some localized wholesaler presentation, which the wholesaler must produce locally.

We feel the "TINS" program will require a considerable amount of selling time on the part of wholesaler salesmen, which could be better utilized selling [Armstrong products]. At the same time, we feel this program conflicts with our future video plans and would not prove to be in our best interest.

We have heard that the organization selling "TINS" has stated that several Armstrong wholesalers have already purchased the system and will be selling it to their customers. To the best of our knowledge, no Armstrong Floor Division wholesaler has committed to the "TINS" system. Some have been approached; however, they haven't agreed to merchandise the system.

J.A. at 7280. A September 27, 1983 memo from Armstrong's New York Regional Manager of the Carpet Division, Robert Guzinsky, to his distributor sales managers parroted much of Humphrey's memo.*fn5 A third memorandum sent to Armstrong marketing representatives in the Detroit area from their district manager, dated October 23, 1983, was largely excerpted from Humphrey's memo.*fn6 J.A. at 7591.

Fineman responded, in the fall of 1983, by threatening Armstrong with an antitrust lawsuit. The dispute culminated in a settlement agreement. Drafted in January 1984, the settlement agreement was signed by Fineman in March of 1984, after a "trial period" in which Fineman signed up three Armstrong distributors and satisfied himself that Armstrong would not continue to interfere with his marketing of TINS. In general terms, the settlement agreement required Armstrong Vice President Dennis Draeger to notify Armstrong's district managers that it had no objection to TINS and required him to send a letter to a list of its distributors explaining that it had no objection to their distributing the TINS magazine. In addition, Fineman could request that Armstrong send a similar letter to prospective TINS distributors.

3. Stern & Company

At the crux of this lawsuit is an Armstrong distributor's change of heart with respect to the TINS magazine. On May 24, 1984, after TINS' settlement negotiations with Armstrong, Fineman and TINS salesman John Wolfe met with Alan Abrahamson, president of Stern & Company, and with Stern's three sales managers: Ken Cloud, John Fischer, and Gray Owen. After receiving Fineman's sales pitch, Abrahamson and his sales managers conferred and agreed to distribute TINS. Abrahamson testified that his sales managers were divided in their support for TINS: Fischer, the resilient sales manager, did not favor TINS, Owen, the carpet manager, slightly favored TINS; and Cloud, the new ceramic manager, highly favored TINS. J.A. at 4286. Abrahamson favored TINS and agreed to sign the letter of intent. See J.A. at 7865.

Fineman assessed distributor marketing rights for Stern at $16,000. After Abrahamson explained that Stern was undergoing some financial difficulty, Fineman required only a 25 percent down payment on that day, J.A. at 1712, which constituted half of the standard 50 percent down payment ordinarily required at the time of the signing of the letter of intent. The balance was to be paid within four to six months. Abrahamson testified that he understood that the royalties from TINS sales received in the first six months would cover the initial $16,000 distributor rights fee. J.A. at 4290. There is no dispute that Stern would not receive exclusive marketing rights for TINS within its sales territory. J.A. at 4427. At that time Fineman and Abrahamson also discussed CFIPS and Abrahamson indicated his interest in receiving a proposal from Fineman for consulting work.

As will later be detailed at length, Abrahamson informed TINS' John Wolfe, following the TINS sales training of Stern's salesmen, that Stern was withdrawing from TINS. TINS relies heavily for its tortious interference and antitrust conspiracy claims on two communications from Armstrong that intervened between Stern's letter of intent and discontinuance of the TINS program. First, during a June 7th meeting, at which Abrahamson and Armstrong's regional sales manager for resilient Robert Roth were present, TINS was discussed for approximately 10-15 minutes, and Roth told Abrahamson that TINS would not "make a lot of sense in the Armstrong scheme of things" because Armstrong has an "overlap program." J.A. at 4084.*fn7 Second, Armstrong executive Humphrey sent a memo dated June 12, 1984, to all Armstrong floor division managers explaining what field managers should tell distributors about Armstrong's "participation" with TINS: that Armstrong would be "unable to offer any assistance" to that distributor. J.A. at 7323.

As a result of Stern's withdrawal, TINS lacked the capital required to produce the videotapes already under contract. TINS ultimately was forced to dissolve its operations. Fineman then threatened to sue Stern for breach of contract and Stern threatened to counterclaim on the basis that TINS had violated the registration and disclosure requirements of the Connecticut Business Opportunity Investment Act, Conn. Gen. Stat. §§ 36-503 to 36-521, and that the Connecticut Act barred TINS from enforcing the letter of intent. J.A. at 8553-55. TINS and Stern settled their dispute on August 9, 1984, and executed a mutual release of liability. J.A. at 8557.

B. Procedural History

In September of 1984, Fineman and TINS filed suit against Armstrong World Industries, Inc. in the United States District Court for the District of New Jersey, alleging generally that Armstrong had influenced Stern to breach its contract with TINS in an effort to drive TINS from the market for video magazines in the floor covering industry. In a five count complaint, the plaintiffs sought compensatory, punitive, and treble damages as well as interest, costs, attorneys fees and injunctive relief.

Count One alleged that Armstrong had violated section 1 of the Sherman Act by "pressuring, persuading and otherwise influencing its independent distributors not to deal with, and indeed to break agreements with, the plaintiffs, thereby cutting off a critical supply of distributors to the plaintiffs." Compl. P 25. Count Two alleged a violation of section 2 of the Sherman Act, asserting that Armstrong possessed monopoly power in the resilient floor covering market which it exercised in an attempt to monopolize a market defined as "consisting of the sale of video magazines to retailers of the floor covering industry [and other interested entities]." Compl. PP 8; 31-32. For the remaining counts, brought pursuant to the laws of New Jersey and Pennsylvania, the plaintiffs asserted the federal court's pendent or diversity jurisdiction. Count Three alleged that Armstrong's conduct constituted a breach of the 1984 settlement agreement between TINS and Armstrong. Compl. P 35. Counts Four and Five alleged intentional interference with contract, Compl. P 37, and a violation of the New Jersey antitrust laws, respectively. Compl. P 39. During trial, when Fineman pressed individual antitrust and tort claims that had not been clearly delineated as counts in the complaint, the district court ruled that the complaint fairly stated Fineman's individual tortious interference claim but rejected his individual antitrust claims.

On May 25, 1988, the district court granted partial summary judgment in favor of Armstrong, dismissing the breach of contract claim and all claims related to Armstrong distributor Nelson & Smallin. A lengthy jury trial then ensued and at the close of plaintiffs' case, the district court directed a verdict for Armstrong on the Sherman Act section 1 claim, concluding that as a matter of law, co-conspirators in a vertical relationship with one another could not share the requisite anticompetitive motive for an agreement prohibited under section 1. The district court dismissed Fineman's individual antitrust claims, a ruling which has not been appealed, but permitted the jury to decide Fineman's individual tort claim, although the court excluded punitive damages on that claim. J.A. at 6828-29.

On April 19, 1991, the jury returned a verdict for the plaintiffs on all the remaining counts. Specifically, it awarded $19.5 million to TINS on its section 2 antitrust claims and $17.7 million to TINS and $2.275 million to Fineman, individually, on their respective tortious interference claims.*fn8 The jury also awarded TINS punitive damages of $200 million. Subsequently, the district court ordered that when the judgment became completely final after all post-trial motions and appeals, TINS would have to elect to recover damages under either the antitrust or the tort causes of action. Finally, in a ruling not challenged on appeal, the district court dismissed Armstrong's counterclaims against TINS and Fineman. J.A. at 89-108.

On June 20, 1991, the district court granted Armstrong's motion for judgment n.o.v. on the tort and antitrust claims which the jury resolved in favor of the plaintiffs. Fineman v. Armstrong World Indus., Inc., 774 F. Supp. 225 (D.N.J. 1991). In the alternative, the district court also conditionally granted a new trial because it found that the verdict was against the weight of the evidence and that the plaintiffs' trial counsel's improper summation grossly prejudiced and inflamed the passions of the jury. The plaintiffs appeal from these final orders requesting essentially that we reinstate the jury's verdict. We turn, initially, to the entry of judgment n.o.v., which we will reverse in part, and then, in Part V, to the alternative grant of a new trial, which we will affirm.

III. Tortious Interference

In this section, we address the tortious interference claims. In Part A, we discuss the question of whether Armstrong waived its grounds for judgment n.o.v. In Part B, we deal with the defendant's contention that the TINS/Stern settlement bars any claims arising out of these facts. Part C begins our substantive Discussion of the tort claim and in Part D we examine a Connecticut statute to determine whether the plaintiffs have satisfied the element of reasonable expectation of economic advantage. In Part E, we reach the question of the sufficiency of the evidence on the tort claims, and in Part F, we address Fineman's individual tort claim; and finally, in Part G, we address punitive damages.

A. Waiver

The plaintiffs pose a threshold procedural question: whether Armstrong properly preserved its contention that TINS and Fineman individually failed to present sufficient evidence of their tortious interference claims such that the district court's grant of judgment n.o.v. on these grounds violated the plaintiffs' Seventh Amendment right to a jury trial. Because the claims of each plaintiff were addressed separately at trial, we will discuss each in turn.

1. TINS

The district court reasoned that judgment n.o.v. on TINS' tortious interference claim was appropriate because TINS had failed to prove that the Connecticut Business Opportunity Investment Act did not bar its tort claim and because TINS had not produced sufficient evidence of wrongful conduct by Armstrong nor that this conduct was the proximate cause of its injury. On appeal, TINS contends that Armstrong failed to preserve these issues in its oral motion for directed verdict. The district court concluded that it had preserved these grounds. Fineman, 774 F. Supp. at 230.

In order to preserve an issue for judgment n.o.v., the moving party must timely move for a directed verdict and specify the grounds for that motion. FRCP 50(a); Bonjorno v. Kaiser Aluminum & Chem. Corp., 752 F.2d 802, 814 (3d Cir. 1984), cert. denied, 477 U.S. 908, 91 L. Ed. 2d 572, 106 S. Ct. 3284 (1986); Mallick v. Int'l Bhd. of Elec. Workers, 644 F.2d 228 (3d Cir. 1981); Orlando v. Billcon Int'l, Inc., 822 F.2d 1294, 1298 (3d Cir. 1987). Absent a motion in accordance with Federal Rule of Civil Procedure 50(a), judicial reexamination of the evidence abridges the plaintiff's Seventh Amendment right to a trial by jury. As explained in Lowenstein v. Pepsi-Cola Bottling Co., 536 F.2d 9, 11 (3d Cir.), cert. denied, 429 U.S. 966, 50 L. Ed. 2d 334, 97 S. Ct. 396 (1976), to enter a judgment notwithstanding the verdict in the absence of a proper motion for a directed verdict "is simply to ask the court to reexamine the facts already tried by the jury and this the court may not do without violating the Seventh Amendment."

Requiring compliance with Rule 50(a)'s commandment that "[a] motion for a directed verdict shall state the specific grounds therefor" additionally ensures that the party bearing the burden of proof will have an opportunity to buttress its case before it goes to the jury and the moving party will not gain an unfair advantage through surprise. Orlando, 822 F.2d at 1294; see Levinson v. Prentice-Hall, Inc., 868 F.2d 558, 562 (3d Cir. 1989) (the purpose of moving for a directed verdict before judgment notwithstanding the verdict is to afford the opposing party an opportunity to cure defects in its proofs prior to submission of the case to the jury); see also Bradford-White Corp. v. Ernst & Whinney, 872 F.2d 1153, 1161 (3d Cir.), cert. denied, 493 U.S. 993, 107 L. Ed. 2d 539, 110 S. Ct. 542 (1989).

TINS does not suggest that Armstrong failed to request a directed verdict timely; indeed the record reflects that Armstrong orally moved for a directed verdict at both the close of the plaintiffs' case and at the close of all of the evidence. J.A. at 3612; 6716. Rather TINS rests its waiver argument on the second requirement, namely that Armstrong failed to specify adequately that with respect to TINS' tortious interference claim, its motion rested partly upon insufficiency of the evidence.

The record reveals that Armstrong's counsel moved for a directed verdict at the close of the plaintiffs' case on grounds that the record was critically deficient of evidence of coercion and that the tort claims could not be maintained in light of the Connecticut Act. Although the oral argument on this directed verdict motion focused primarily on the effect of the Connecticut Act and the antitrust claims, Armstrong's counsel stated that "I will come back to the factual aspects of our position [on] the inducement claim. We don't believe there is sufficient evidence of coercion here to sustain that claim." J.A. at 3587-88. During the course of that argument, Armstrong's counsel did not return to that contention in the context of discussing the tort claim. Later, during the oral argument on its renewed motion for directed verdict at the close of all of the evidence, Armstrong returned to the theme that the plaintiffs had not adduced evidence that Armstrong's conduct did not constitute legitimate business activity. J.A. at 9103. Although this issue was raised in connection with the antitrust claim, it also applied to the argument concerning the tort claims. The record thus clearly supports the district court's Conclusion that Armstrong had properly preserved each of these grounds. Fineman, 774 F. Supp. at 230.

While it is true that Armstrong's counsel could more clearly have identified the grounds for directed verdict by intoning the words "insufficiency of the evidence on the tortious interference claim," or more elaborately arguing that ground, we conclude that Armstrong's counsel did argue the factual components of an insufficiency of the evidence claim in terms which adequately apprised the district court and plaintiffs' counsel of the reasons for its motion. Because Armstrong raised the factual components, plaintiffs' counsel was clearly on notice of the legal rubric under which Armstrong planned to proceed.

This case is distinguishable from Orlando, in which the motion for directed verdict was premised solely upon a liability issue but judgment n.o.v. was sought on a damages issue. Orlando, 822 F.2d at 1298. Our reasoning in Orlando, that the plaintiff was not given notice that the adequacy of the proof of damages was disputed since the motion for directed verdict rested solely on the insufficiency of the evidence to prove unlawful interference, id., is not implicated here. Rather, this case more closely follows Acosta v. Honda Motor Co. Ltd., 717 F.2d 828 (3d Cir. 1983). In Acosta we recognized that defense counsel should have been more explicit in stating the grounds for its directed verdict motion. We nonetheless held that the communicative content, "'specificity' and notice-giving function of an assertion should be Judged in context." Id. at 832 (citation omitted). Moreover, we noted that plaintiff's counsel and the district court had both "understood and responded" to defense counsel as if he had been more specific. Id. The same is true in this case where the district court ruled, prior to acquiring a transcript, that the issues had been preserved.

2. Fineman Individually

With respect to his individual tortious interference claim, Fineman contends that Armstrong also failed to preserve the issue of insufficiency of the evidence in its motion for directed verdict. The resolution of this claim rests upon the unique factual circumstances here and the evolution of Fineman's individual tort claim during the trial. Armstrong responds that Fineman posed his individual claim for tortious interference for the first time after the district court dismissed his individual antitrust claims, which followed the close of the plaintiffs' case and Armstrong's initial timely motion for directed verdict. In support of this position, Armstrong contends that both the complaint and the pretrial statement contain only an individual antitrust claim and that Fineman retooled his individual claim to aver tortious interference after the district court dismissed his individual antitrust claim. Because the individual tort claim surfaced after Armstrong's initial directed verdict motion, Armstrong contends that it could not have waived its objections at that time.

Although Fineman's individual tort claim may have been inartfully pleaded,*fn9 by April 1, 1991, after several months of trial, the district court had ruled that it was a viable claim, prompting Armstrong, during its renewed motion for directed verdict at the close of all the evidence, to raise "two main grounds": (1) Fineman was not a party to the Stern-TINS contract, and (2) New Jersey law does not provide for a tortious interference claim by a non-party. J.A. at 9057-58.*fn10 Given the manner in which this claim developed at trial, we cannot fault Armstrong for having failed to move for directed verdict upon this claim until the close of the evidence and hold that these grounds for judgment n.o.v. on this claim were adequately preserved.

B. The TINS-Stern Settlement

Before reaching the merits of the tortious interference claim, we must also briefly address Armstrong's contention that the plaintiffs' tort claims are barred by the TINS-Stern release executed in the fall of 1984. After Fineman threatened to sue Stern for the additional $4,000 unpaid deposit, Stern voided the letter of intent, threatened to report TINS to the Connecticut Commissioner of Banking for failing to register under the Connecticut Act, and threatened to counterclaim for the return of Stern's $4,000 deposit. J.A. at 4328-30; 8553-55. TINS and Stern ultimately executed a mutual release of all claims arising out of the letter of intent, in which TINS received $1.00 "and other good and valuable consideration." J.A. at 8556-58; 8557. This settlement released Stern and its "assigns" without mention of Armstrong.

Armstrong suggests that where two parties to a contract enter into a settlement agreement mutually discharging them from any liability under the contract, one of those parties may not then seek recovery against a third party for tortious interference with that contract. Armstrong has not provided any New Jersey caselaw to support its position and we conclude that the New Jersey Supreme Court would not bar this action.

The New Jersey Supreme Court has evidenced its preference to permit an injured plaintiff the opportunity to settle with one tortfeasor without jeopardizing its ability to seek nonduplicative recovery from another tortfeasor. In Breen v. Peck, 28 N.J. 351, 146 A.2d 665 (N.J. 1958), involving tortious interference with a brokerage agreement, the New Jersey Supreme Court ruled that the plaintiff could seek recovery against one joint tortfeasor after settling with the other joint tortfeasor. It rejected the English Release Rule, under which settlement with one tortfeasor precludes subsequent recovery from any other joint tortfeasors, reasoning that that rule shortchanges the claimant and overcharges the person who settles. Id. at 668. Adopting a view attuned to encouraging fair settlements, the court in Breen ruled that a plaintiff could sue non-settling tortfeasors until full satisfaction was obtained. Id. at 672-73. The rationale of Breen entitles a plaintiff "to pursue all those who are independently liable to him for his harm until one full satisfaction is obtained." McFadden v. Turner, 159 N.J. Super. 360, 388 A.2d 244, 246 (N.J. App. Div. 1978).

There is no claim that TINS received full satisfaction from the release with Stern. Whereas TINS threatened suit against Stern for $4,000 (the half of Stern's deposit that had been deferred) and Stern threatened to counterclaim for the $4,000 it had paid, TINS sought much more than $4,000 in lost profits as consequential damages for the destruction of its business as an alleged result of Armstrong's interference. Thus Armstrong's reliance upon IMAF S.p.A. v. J.C. Penney Co., (S.D.N.Y. Apr. 24, 1991) in support of its theory of a bar is misplaced. There the identical damages had been sought against both the breaching party and the tortfeasor, and the court determined that by its own terms the settlement expressly provided that IMAF was fully compensated even though it had not received payment.

Given New Jersey's strong policy in favor of permitting an injured party to seek full recovery from each tortfeasor, we decline to invoke a contrary rule from a different jurisdiction. See Swift v. Beaty, 39 Tenn. App. 292, 282 S.W.2d 655, 659 (Tenn. App. 1954). We conclude that the plaintiffs are not barred by the TINS-Stern settlement from bringing their tortious interference claims against Armstrong.

C. Tortious Interference Claims Under New Jersey Law

We turn now to the substance of the tortious interference claims, which are governed by New Jersey law. Under New Jersey law, the five elements of a claim of tortious interference with a prospective business relationship are: (1) a plaintiff's reasonable expectation of economic benefit or advantage, (2) the defendant's knowledge of that expectancy, (3) the defendant's wrongful, intentional interference with that expectancy, (4) in the absence of interference, the reasonable probability that the plaintiff would have received the anticipated economic benefit, and (5) damages resulting from the defendant's interference. Printing Mart-Morristown v. Sharp Elec. Corp., 116 N.J. 739, 563 A.2d 31, 37 (N.J. 1989); see Restatement (2d) of Torts § 766B.

Armstrong does suggest, however, that in a competitive business context a plaintiff asserting a claim of tortious interference must meet a heightened evidentiary requirement akin to the proof required for an antitrust claim. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986); Edward J. Sweeney & Sons, Inc. v. Texaco, Inc., 637 F.2d 105 (3d Cir. 1980), cert. denied, 451 U.S. 911, 68 L. Ed. 2d 300, 101 S. Ct. 1981 (1981). In the antitrust arena, "conduct as consistent with permissible competition as with illegal conspiracy does not, standing alone, support an inference of antitrust conspiracy." Matsushita, 475 U.S. at 588 (explaining the holding in Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 764, 79 L. Ed. 2d 775, 104 S. Ct. 1464 (1984)). Where a defendant's allegedly illegal activity may stem from either procompetitive or anticompetitive objectives, inquiry must be made to determine whether a permissible inference can be drawn in favor of the plaintiff. See, e.g., Matsushita, 475 U.S. at 590 (a twenty-year conspiracy to set predatory prices could not be logically inferred because the losses sustained could never have been recouped); Monsanto, 465 U.S. at 765 (an illegal conspiracy to eliminate a competitor could be permissibly inferred on that record). Armstrong asserts that neither federal antitrust nor New Jersey tort laws were intended to stifle competitive activity; thus, a heightened evidentiary standard will provide protection from liability to defendants who simply engaged in the pursuit of legitimate marketplace competition.

Analogizing to antitrust cases, Armstrong alleges that the requirement of "'wrongful' conduct involving 'malice', which is defined as the intentional doing of a wrongful act 'without justification or excuse'" interjects a heightened standard into a tortious interference claim under New Jersey law. Appellee's Brief at 21 (citations omitted). See Printing Mart, 563 A.2d at 40 (identifying the pivotal question as whether the defendant's conduct is "sanctioned by the rules of the game"). Armstrong does not cite to any New Jersey caselaw directly supporting its heightened standard of proof, however, and we have found none. Assuming, arguendo, that antitrust law requires such a standard, cf. Eastman Kodak Co. v. Image Technical Services, Inc., 119 L. Ed. 2d 265, 112 S. Ct. 2072, 2083 (1992) ("Matsushita demands only that the nonmoving party's inferences be reasonable in order to reach the jury, a requirement that was not invented, but merely articulated, in that decision"), we are not persuaded that it should apply to a New Jersey tortious interference claim. Since the New Jersey courts examining this cause of action in a business context have not articulated a special burden of proof, we hesitate to do so.

Moreover, we do not find New Jersey's cause of action for tortious interference to be unduly hostile to procompetitive conduct in any event. Indeed, the admittedly "amorphus" element of "wrongful, unjustified conduct," is a flexible standard "and must focus on a defendant's actions in the context of the case presented." Printing Mart, 563 A.2d at 40. This standard also includes directions to gauge the defendant's conduct against "the rules of the game." Id. As formulated, New Jersey's wrongful conduct element adequately takes into consideration procompetitive conduct.

We reject Armstrong's assertion that "it would be illogical to apply differing legal rules on permissible inferences for antitrust and tort claims where, as here, the very same conduct is challenged as both tortious interference and an antitrust violation." Although often applicable to a single dispute, tort and antitrust causes of action require widely divergent proofs. Moreover, these causes of action vindicate widely differing policies; the first is wholly personal to the plaintiff-competitor and the second requires the plaintiff to demonstrate harm to competition at large and antitrust injury. See Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 486, 50 L. Ed. 2d 701, 97 S. Ct. 690 (1977). These divergent proofs and purposes readily account for any arguable differences in their standards of proof.

D. TINS' Reasonable Expectation of Economic Advantage

Although New Jersey law governs the tortious interference claim, the Connecticut Business Opportunity Investment Act, which requires registration and disclosure for certain kinds of business ventures, bears upon whether TINS could establish the first element of tortious interference: a reasonable expectation of economic advantage arising from TINS' agreement with Connecticut-based Stern. Because neither party challenges the ruling of the district court that New Jersey courts would look to the law of the situs of the contract in making that determination, we will examine the Connecticut Act to determine whether the agreement between TINS and Stern could have created a reasonable expectation of business advantage.

The district court held that the Connecticut Act applied to TINS and that because TINS had not registered with Connecticut's Banking Commissioner nor made other efforts to comply with the Act, the TINS-Stern letter of intent was void as a matter of public policy. Therefore it would have been unenforceable by TINS and could not support a claim for tortious inference with that prospective contract against a third party. The plaintiffs claim that the district court erred when it applied the Connecticut Act to defeat, as a legal matter, TINS' reasonable expectation of economic benefit in the Stern-TINS letter of intent.*fn11 In this appeal TINS raises only two discrete arguments with respect to the application of the Act; therefore, we will only consider those two issues.

1. The Connecticut Business Opportunity

Investment Act

The Connecticut Act, effective in 1979, was enacted to prevent misrepresentations and fraudulent practices in business opportunity investment sales. Brian J. Woolf, Connecticut Business Opportunity Investment Act: An Overview of Its Regulatory Requirements and Its Interface with the Federal Trade Commission's Rule Entitled "Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures", 54 Conn. Bar J. 415 (1980) (hereinafter "Overview"). In enacting the statute, the Connecticut legislature sought to regulate "business opportunities" that may be peddled by "high pressure salesmen who flash in and out of motel rooms and are gone before an investor knows he's been fleeced," id. at 416 (quoting 12 Continental Franchises Rev. No. 10 at 1 and 2 (June 11, 1979)), by requiring "sellers" of "business opportunities" in Connecticut to register with the Connecticut Banking Commissioner and provide disclosure of specified information to prospective "purchasers-investors." A "business opportunity" is defined as:

Conn. Gen. Stat. § 36-504(6) (emphasis added).

A seller who fails to register under the Act is prohibited from selling business opportunities within Connecticut.*fn12

The Act also affords prospective protection and retrospective avenues of relief for a purchaser-investor of a business opportunity. For example, at a specified time prior to the sale of a business opportunity, the seller must disclose specific information to the purchaser-investor including a financial statement. Conn. Gen. Stat. § 36-506. In addition the Act requires that the seller document any representations of potential profits. Woolf, Overview, supra, at 427. Retrospective avenues of relief afforded an injured purchaser-investor include both civil and criminal remedies. Id. at 429-30. Specifically, an injured purchaser-investor may sue for recovery of damages including attorneys' fees or may bring an action against a bond or trust account which is a prerequisite for registration for certain sellers. Conn. Gen. Stat. § 36-517(a), (b), (d).

If the seller has violated the Act by failing to disclose, to perform, or by making misrepresentations, the Act expressly makes voidable at the purchaser-investor's option any contract entered into by a seller:

If a business opportunity seller . . . fails to give the proper disclosures in the manner required by § 36-506 . . . then within one year of the date of the contract, upon written notice to such business opportunity seller, the purchaser-investor may void the contract and shall be entitled to receive from such business opportunity seller all sums paid to such business opportunity seller.

Conn. Gen. Stat. § 36-517(a) (emphasis added).

2. The Void-Voidable Distinction

TINS contends that the Connecticut Act operates only to make voidable, at the purchaser-investor's option, a contract in violation of the Act's requirements. TINS argues that the district court improperly negated the distinction between void and voidable contracts under the Act in holding that the TINS-Stern letter of intent constituted a contract void as against the public policy enshrined in the Connecticut Act. The district court acknowledged that the Connecticut Act gives the purchaser an option to void the contract with a seller who failed to comply with the Act's requirements. Fineman, 774 F. Supp. at 241. According to the district court, "the Connecticut Act specifically treats a contract voided at the option of the buyer as a void contract by eliminating all claims based thereon." Id. Thus it ruled that, lacking an enforceable economic expectation as a matter of law, TINS did not prove the requisite reasonable expectation of business advantage because Stern voided the letter of intent.

New Jersey law, which we apply to the claim of tortious interference, clearly provides that voidable contracts may still afford a basis for a tort action when the defendant interferes with their performance. Harris v. Perl, 41 N.J. 455, 197 A.2d 359, 363 (N.J. 1964). Given this rule, TINS' tortious interference claim against Armstrong is not defeated simply because Stern withdrew and voided the letter of intent. The facts of this case clearly demonstrate ...


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