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Linen Room, Inc. v. Angelica Textile Services

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


April 26, 2010

THE LINEN ROOM, INC., PLAINTIFF-RESPONDENT,
v.
ANGELICA TEXTILE SERVICES, INC., DEFENDANT-APPELLANT.

On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-3548-06.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted April 13, 2010

Before Judges Carchman and Lihotz.

In this commercial contract dispute, defendant Angelica Textile Services (Angelica) appeals from a jury verdict in favor of plaintiff The Linen Room, Inc. (TLR) awarding TLR damages in the amount of $162,892. During the course of the trial, Angelica moved for an involuntary dismissal at the conclusion of TLR's case, a motion for a directed verdict at the conclusion of all of the proofs and a motion for a judgment notwithstanding the verdict. In all instances, Judge Currier denied the applications prompting this appeal. We conclude that she correctly denied the various motions, the jury's verdict was supported by the evidence, and Angelica's arguments are without merit. Accordingly, we affirm.

These are the facts adduced at trial. Angelica is engaged in the business of providing linen and related laundry services to hospitals and other health related facilities. Specifically, Angelica provides these institutions with linens, collects them after use, cleans them and then returns them to the facility.

During the mid-1990's, Donald Chapman (Chapman), sole shareholder of TLR, and a sales representative for WinansMcShane, a "wholesale distributor . . . of paper and janitorial supplies," included Angelica as one of his customers. After observing Angelica's business for several months, Chapman noted Angelica was encountering two primary difficulties: first, since the company was providing its own metal hampers for collecting soiled linens, it was incurring sizable up-front costs each time it secured a new client; and second, clients were asking Angelica to replace the linen hamper bags with a disposable variety to lessen concerns that the reusable bags would wear, potentially exposing blood-borne pathogens or other biohazardous material to the air.

In 1997, Chapman developed a marketing concept whereby he would assume responsibility for manufacturing and procuring the hampers and provide them to Angelica for free, provided the company agreed to exclusively purchase his new linen bags.*fn1

After presenting the concept to an Angelica general manager, Chapman presented the proposal to a meeting of Angelica executives including Angelica's president in Stone Mountain, Georgia. The proposal was accepted with five Angelica plants participating - Edison, New Jersey (Edison); Ballston Spa, New York (Ballston Spa); Chicago, Illinois (Chicago); Batavia, New York (Batavia); and Rockmart, Georgia (Rockmart). Thereafter, an eight-month process of informal "trial and error" ensued, which sought to resolve many of the non-business aspects of the project, particularly hamper design. On May 12, 1998, Chapman sent a letter on Winans-McShane stationary to Wayne Moore, Angelica's Director of Special Projects reflecting Chapman's first official proposal of his "disposable blue soiled linen bag and hamper" program. Under the section marked "Pricing", Chapman set the cost of the bags at $30.75 for "240 cs/12 rolls" and explicitly stated the price "includes hamper[]." (Emphasis added). Chapman also identified several outstanding issues that had arisen during the eight-month trial period. These included:

Lease

*Liability insurance on the hamper?

*Since most of the hampers will be supplied at no charge, who signs the lease?

*If a hospital is on our bag program and Angelica loses the account, what happens?

*What happens if a hospital purchases bags from another company after we have provided hampers?

Maintenance

*Who maintains the hampers?

Miscellaneous

*What accounts are worthwhile for you to convert?

These issues were neither fully addressed nor resolved before the program started.

In consultation with Winans-McShane, TLR was created to oversee and administer the hamper program in its entirety. In a September 8, 1998 letter to Kevin Nowak, then-General Manager of Angelica's Ballston Spa facility, Chapman confirmed TLR "has made a substantial investment in tooling and the acquisition of several thousand hampers after months of consultation" with Nowak and other regional and individual plant managers.

Despite commencement of the program, however, no writing or contract was ever executed reflecting the terms of the arrangement. Chapman acknowledged dealing primarily with individual plant managers, not company-wide decision-makers, and he decided to proceed despite Angelica's failure to address the issues raised in the May 1998 letter. At no point did Angelica commit to a particular policy with regard to termination of the program. Apparently Chapman was unconcerned as evidenced by his failure to request that Angelica pay for a shipment of hampers that disappeared when a hospital client closed during the trial period. Chapman stated Angelica pushed ahead without discussing many of the things that we had posed as potential problems[. . . .] The mood was let's just get it going, we've got hospitals coming every day, let's just go.

I was looking at a $500 million corporation to do business with and quite happy to have them as a client and inexperience[d] in having my own business and felt that I was in the comfort zone as long as I delivered on or behalf of the customer that I would get a fair return on my investment.

In total, TLR supplied between 7,000 and 9,000 hampers to be used in Angelica-serviced facilities.

Chapman explained that "from day one," TLR was prepared to bear the upfront costs of the hampers in exchange for Angelica's promise to exclusively purchase TLR's linen bags. Initially, the program worked well. There were minimal complaints about the quality of TLR's product or its pricing, and there was no suggestion that Angelica was actively courting TLR's competitors; however, Chapman only discussed what would take place if the situation changed "in casual conversation" with individual plant managers because he "didn't have an uncomfortable feeling that [ ] was going to happen."

Chapman observed that the arrangement began to change when Nowak was promoted to Regional Manager for Angelica's Edison, Ballston Spa and Chicago plants. Chapman "started to hear rumblings" from individual plant managers that a change was forthcoming. Despite these calls, Chapman continued to believe the status quo would continue. He approached Joseph Venezia, the new plant manager at Angelica's Edison facility, on December 14, 2001. Chapman had no prior relationship with Venezia and did not feel "comfortable" with him. Chapman noted Venezia's plant was ordering an incredible amount of hampers from me and obviously as we discussed, the upfront cost was tremendous and I became very concerned, [as] I hadn't met this fellow[.]

I was low on money and I drove over there and was very concerned at the number of hampers and wanted to know where they were going and that I would like [Venezia] to sign an agreement to protect me[.] . . .

[I] had his secretary submit to him something that I drew up and he signed it and sent it back out.

In pertinent part, the document read as follows:

If for any reason Angelica wishes to purchase soiled linen bags elsewhere, Angelica may purchase the hampers from [TLR] at a price of $96.50 each.

In consideration of the commitment, [TLR] agrees to replace broken hamper stands at no charge and to remain price competitive . . . . [(Emphasis added).]

Both sides agreed the document was not signed by an individual with company-wide authority. Chapman testified his understanding of the agreement was that Angelica "must pay [] for the stands" should they cease to purchase his linen bags. Further, Chapman did not feel compelled to secure written agreements from other plant managers or senior executives as he "was a young man very excited about having all of this business" who "was taught that intent and certain other common considerations" counted more than contractual legalese.

Shortly after Venezia signed the agreement - which Chapman believed obligated Angelica's Edison facility to purchase all of its outstanding hampers at nearly $100 per unit - Chapman bought out McShane's interest in TLR for one dollar and secured a non-compete agreement.

Thereafter, Angelica's facilities stopped purchasing bags from TLR and secured a contract with a different vendor. Chapman only secured an explanation from the Batavia plant. The facility's general manager, Ray Shurtz, informed Chapman that, as a result of State regulations, he wanted to utilize a provider who had an established recycling program for the linen bags. Shurtz also gave Chapman the impression that Nowak was pressuring individual plant managers to leave TLR for new vendors. Despite the absence of a formal agreement, the Batavia plant's new vendor agreed to pay Angelica $50 for each new hamper and $20 for each older model hamper retained. Angelica would forward those sums to Chapman.

In response, Chapman alleges he sent letters to various plant managers and Nowak imposing the same condition of repayment. The letter to Nowak, dated March 4, 2003, specified that "[p]er the agreement . . . [i]f the hospital and/or Angelica chooses not to use [TLR] bags, then the only alternative is to purchase the hampers at $96.50 each." This marked the first mention of the $96.50 price term to any member of Angelica's senior management.

Pursuant to Nowak's direction, the three plants under his supervision declined to reimburse TLR for the cost of the hampers.*fn2 As found by the trial court, Nowak ignored Chapman's requests for payment for over two years. In January 2005, Chapman sent Nowak an itemized list of all hampers delivered to each of his three facilities, complaining that "[t]he aforementioned plants, with full knowledge of the associated obligations to [TLR], ordered hampers from [TLR] and did not pay for them, and under your direction, did not purchase bags for the hampers."

As no payment continued to be forthcoming, TLR filed a complaint on March 30, 2006, alleging breach of contract and conversion.*fn3

At trial and at the end of plaintiff's case, Angelica moved for judgment, arguing Chapman's admission that "there was no discussion as to an obligation to purchase hampers" at the origination of the program, in addition to a failure to subsequently document or secure acceptance of such agreement, precluded recovery. Specifically, Angelica pointed to the permissive language of the December 14, 2001 document signed by Venezia and Chapman's failure to bring the issue to Nowak's attention until 2003, when all of the hampers had already been shipped.

Angelica questioned TLR's ability to prove the existence of a contractual relationship, asking where was there an offer made by either Angelica to buy hampers . . . upon stopping buying bags from [TLR] . . . or conversely an offer made by [TLR] to sell bags to Angelica with complimentary hamper stand provided that Angelica paid $96.50 for those hamper stands if they stop[ped] buying bags[?]

[Chapman's] answer is . . . [w]ell, I supplied the bag stands, there must have been an agreement. There did not have to be an [independent] agreement to pay for those stands . . . if and when Angelica chose to stop buying linen bags. If Mr. Chapman wanted such an agreement, he was obligated to negotiate it openly . . . and for the parties to intend to come to that agreement through an offer and an acceptance for consideration in a documented meeting of the minds.

Chapman countered by contending the term was fairly implied, noting the "regular contact" and "numerous meetings" he had with Angelica staff. Alternatively, while acknowledging the Chicago and Ballston Spa plants did not accept any agreement respecting the purchase of hampers at $96.50 per unit, Chapman suggested there was an "agreement to pay something . . . that he be compensated in some way for those hampers if his bags were not being used." With regard to the Edison facility, Chapman questioned Angelica's reliance on the December 14, 2001 agreement's use of "may" to defeat any alleged obligation, noting

[t]here would be no reason . . . to put this in writing if what I meant was you can pay me [$]96.50 for [t]he hampers if you feel like it, but if not, you can just keep them.

If that was the intent, there would be no reason to put this in writing at all. I think the implication in that agreement is clear and I think that it's really for the jury to determine [whose] interpretation is correct.

The court denied Angelica's motion to dismiss, finding the record clearly supported that "from the first day" the parties' understanding was that TLR "would make the upfront investment and in return Angelica would b[u]y their soil[ed] linen bags." Despite identifying Chapman's failure to consult an attorney or use otherwise legally binding language in the December 2001 agreement, the judge could not identify any "proofs that [Chapman] intended to give his hampers away for free." Focusing on the original purposes of the hamper program, Judge Currier found Chapman had offered sufficient proofs to establish the existence of a contract.

After completing its defense, Angelica renewed its motion for judgment primarily on the same grounds previously presented to the court. Judge Currier again denied the motion "for the reasons . . . previously placed on the record."

After deliberations, the jury unanimously found: (1) a contract existed "that obligated [Angelica] to purchase soil[ed] linen hampers that had been previously supplied by [TLR] if and when [Angelica] stopped purchasing soil[ed] linen bags from [TLR] for use with those hampers"; (2) that Angelica breached this contract; and (3) the damages suffered by TLR as a result of Angelica's breach amounted to $162,892.

Angelica's moved for a judgment notwithstanding the verdict or in the alternative, for a new trial. Angelica also moved for a remittitur.

In addition to restating its prior arguments, Angelica also suggested that markings on invoices presented to the jury as evidence confirmed it had wrongfully calculated damages. Specifically, counsel maintained the amount of damages was equivalent to the number of hampers that were shipped to the Edison facility during the term of the contract times $96.50 per hamper. Plaintiff put into evidence [ ] a summary of the total hampers shipped to all three facilities [ ] at issue[.]

There is on that document for the column for the Edison hampers a check mark next to each invoice and total that plaintiff put into evidence. Plaintiff acknowledged . . . that those mark[s] were put there by the jury[.]

There are no check marks next to the Ballston Spa [or] Chicago hampers[.] So the question becomes why the distinction[?]

If the jury did not award $96.50 for each hamper shipped to Edison and nothing for each hamper shipped [elsewhere] then the verdict is a flat out compromise that there's no foundation for.

[A]ssuming . . . that there is a distinction for the Edison facility which can only logically be based on the December 14th, 2001 document, what consideration did my client receive to retroactively apply the terms of the document to hampers that were shipped before [that date]?

Judge Currier denied the motions and stated:

The jury came to a reasonable conclusion that you had to buy the hampers. Who would ever pay for [hampers] if given a choice? And so they rejected the argument that [Angelica's] counsel made with regard to the word "may."

Credibility was a large part of this case. . . . There was a witness for Angelica, Mr. Nowak, who was in this [c]court's view and I'm placing this on the record because I'm sure it doesn't end here today, he was quite condescending, he was unlikable.

It was clear through the course of the case and the letters and the testimony that he didn't give [Chapman] the time of day. He didn't respond to any of his letters. He didn't continue to do business with him. I believe [Chapman] indicated that he made phone calls to him . . . and this gentleman was not interested in having any further discussion with him.

The arguments being made to me [ ] to put aside this jury verdict are the same arguments that were made to me during the case that I was wrong; that the case never should have gone to the jury and then presumably the further argument as to consideration.

This appeal followed.

On appeal, Angelica raises the same issues it raised before the trial judge, which although raised pre-trial, during trial and after the verdict, are all premised on the same dominant theme -- there was no contract obligating Angelica to pay for the hampers if it ceased buying TLR's bags. As a corollary to that argument, Angelica asserts that if the December 14, 2001 letter was an agreement to pay for the hampers, only those hampers delivered after that date would be compensable.

We now address that issue and review the relevant case law germane to this appeal.

Contracts may be either express or implied-in-fact. Whether an agreement is reached by written words or manifested purely by conduct is of no legal moment. Troy v. Rutgers, 168 N.J. 354, 365 (2001); Rock Work, Inc. v. Pulaski Const. Co., 396 N.J. Super. 344, 356 (App. Div. 2007), certif. denied, 194 N.J. 272 (2008); see also Duffy v. Charles Schwab & Co., 123 F.Supp. 2d 802, 816 (D.N.J. 2000); R.J. Longo Const. Co. v. Transit Am., Inc., 921 F.Supp. 1295, 1306 (D.N.J. 1996).

When interpreting a contract, courts strive to discover the "intention of the parties to the contract as revealed by the language used . . . the situation of the parties, the attendant circumstances, and the objects they were thereby striving to attain . . . ." Onderdonk v. Presbyterian Homes of N.J., 85 N.J. 171, 184 (1981) (internal quotation omitted). While the construction and interpretation of a contract is primarily a question of law decided by the court, Bosshard v. Hackensack Univ. Med. Ctr., 345 N.J. Super. 78, 92 (App. Div. 2001), "where there is uncertainty, ambiguity or the need for parol evidence . . . then the doubtful provision should be left to the jury." Great Atl. & Pac. Tea Co. v. Checchio, 335 N.J. Super. 495, 502 (App. Div. 2000) (citing Michaels v. Brookchester, Inc., 26 N.J. 379, 387 (1958); Garden State Bldgs. v. First Fid. Bank, 305 N.J. Super. 510, 525 (App. Div. 1997), certif. denied, 153 N.J. 50 (1998)).

In other circumstances, we have held that the provision of services to another, under circumstances negating the existence of a gratuitous gift, creates an implied obligation on the part of the recipient to pay for the reasonable value of such services. Wanaque Borough Sewer. Auth. v. Twp. of W. Milford, 281 N.J. Super. 22, 29-30 (App. Div. 1995), aff'd in part, rev'd in part on other grounds, 144 N.J. 564 (1996). The issue presented here is whether such expectation by TLR was reasonable and warranted under the facts of this case.

With these principles in mind, Judge Currier properly denied each of Angelica's motions for judgment. While the program proposals sent to Angelica between 1998 and 2001 mentioned that the price of bags included the hamper, and while there was no written agreement pre-dating the December 14, 2001 understanding between Chapman and Venezia, the issue of payment for the hampers if Angelica stopped purchasing the linen bags was unstated.

With regard to the period between 1998 and 2001, the attendant circumstances surrounding commencement of the soiled linen bag program support a reasonable conclusion that compensation for the hampers was (or at least could have been) contemplated by the parties. The price of the bags only included the cost of the hampers because Angelica had agreed to purchase the bags exclusively from TLR. Similar considerations apply to the December 14, 2001 agreement. The language of the letter is ambiguous and requires that "the situation of the parties, the attendant circumstances, and the objects they were thereby striving to obtain" play an important role in divining intention. Onderdonk, supra, 85 N.J. at 184. The evidence presented by TLR was not simply, as Angelica claims, to prove that Chapman "is not stupid." Rather, it was to place the agreement in context, noting that its purpose was to protect TLR's investment at a time when its continued provision of services was in serious doubt.

Although Chapman exhibited an element of business naiveté throughout the continuing transaction, he did understand that this issue remained unresolved and made numerous attempts to contact Angelica to determine the understanding of the parties. In response, Angelica staff - particularly Nowak - ignored Chapman.

As the record provided genuine factual issues as to whether TLR would objectively have expected to be paid for the hampers if Angelica breached its responsibilities under the soiled linen bag program, Judge Currier properly submitted these issues to the jury for resolution.

Post trial, we will not overturn a trial judge's ruling on a motion for a new trial on the ground that the jury's verdict was against the weight of the evidence unless it clearly appears that there was a miscarriage of justice under the law. R. 2:10-1. We defer to the trial judge with respect to intangibles such as credibility and demeanor, but we will otherwise reach our own independent conclusion of whether such a miscarriage occurred. Ogborne v. Mercer Cemetery Corp., 197 N.J. 448, 463 (2009); Jastram v. Kruse, 197 N.J. 216, 228 (2008). We find no miscarriage of justice here.

Judge Currier found that Nowak, Angelica's primary witness, was "quite condescending," "unlikable" and testified to purposefully ignoring Chapman in the hope that the remaining issues between the parties would remain unresolved.

This supported an implied contract subjecting Angelica to an unspecified amount of damages in the event of breach; specifically, that TLR's agreement to provide hampers for free was conditioned upon Angelica's exclusive use of its linen bags and that Angelica intentionally sought to avoid resolving issues surrounding the program's termination. The jury could properly have found that the December 14, 2001 agreement between Chapman and Venezia memorialized the understanding of the parties. In either instance, a verdict in TLR's favor does not constitute a miscarriage of justice.

Finally, as to Angelica's claim of remittitur as well as its belated claim of error in the jury charge, we conclude that both arguments are without merit and require no further comment. R. 2:11-3(e)(1)(E).

We conclude that the jury verdict here appropriately reflected the agreement of the parties and we find no basis for our intervention.

Affirmed.


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