Southprint, Inc. v. H3, Inc. , 208 F. App'x 249 ( 2006 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 05-2138
SOUTHPRINT, INCORPORATED, d/b/a Checkered Flag
Sports,
Plaintiff - Appellant,
versus
H3, INCORPORATED,
Defendant - Appellee.
Appeal from the United States District Court for the Western
District of Virginia, at Danville. Norman K. Moon, District Judge.
(CA-02-38-4)
Argued: September 20, 2006 Decided: December 7, 2006
Before MOTZ and GREGORY, Circuit Judges, and Richard L. VOORHEES,
United States District Judge for the Western District of North
Carolina, sitting by designation.
Affirmed by unpublished opinion. Judge Gregory wrote the opinion,
in which Judge Motz and Judge Voorhees joined.
ARGUED: Harold David Gibson, GENTRY, LOCKE, RAKES & MOORE, Roanoke,
Virginia, for Appellant. Luke Anderson, MERCHANT & GOULD, L.L.C.,
Atlanta, Georgia, for Appellee. ON BRIEF: William R. Rakes, Monica
Taylor Monday, GENTRY, LOCKE, RAKES & MOORE, Roanoke, Virginia, for
Appellant. Brian C. Riopelle, Kristen M. Calleja, MCGUIREWOODS,
L.L.P., Richmond, Virginia, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
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GREGORY, Circuit Judge:
Southprint, Inc. ("Southprint") appeals the dismissal on
motion for summary judgment of its state-law causes of action
against H3, Inc. ("H3"). Because we agree with the district court
that H3 is entitled to judgment as a matter of law, we affirm.
I.
In August of 2001, the prominent national auto retailer
AutoZone began contemplating a chain-wide program that would
promote hats bearing Ford, Chevy, and Dodge logos in its stores.
Only H3 and Southprint (doing business as Checkered Flag Sports)
were considered as possible vendors for the program. In the early
months of 2002, both vendors participated in extensive test
programs with AutoZone, designed to ascertain which vendor would
best serve AutoZone's needs. On April 18, 2002, Southprint
submitted a bid to AutoZone for the Ford, Chevy, and Dodge program.
H3 submitted its quote eleven days later on April 29.
Earlier, on March 23, 2002, Raul Alvarez, acting on
Southprint's behalf, wrote to DADA Corp. ("DADA"), hat manufacturer
for both Southprint and H3, to ask for price quotes on hats DADA
made exclusively for H3. H3 supplied the hats to its client, Roush
Racing ("Roush"). E-mails Alvarez sent two and three days later
indicate that he received the pricing information from DADA and
3
that Southprint was, at that time, considering using that
information to capture Roush's business.
According to the uncontested affidavit of H3 president Scott
Hines, on April 2, 2002, H3 asked DADA to enter into an exclusive
relationship with H3 in order to protect H3's pricing information
and hat designs, as well as to ensure a consistent source of hats.
Alvarez recalled speaking with Stephen Park of DADA in March or
April of 2002 about DADA's plans to cease doing business with
Southprint. On April 17, DADA released a letter announcing that it
had entered into an exclusive deal with H3. The letter stated that
DADA would manufacture Ford, Chevy, and Dodge headwear only for H3
and that DADA would not accept any orders for these types of caps
from other customers as of the date of the letter.
On May 9, 2002, Alvarez received an e-mail from Park of DADA
saying that the following day Checkered Flag Sports should begin
working with a company called Trademax instead of DADA. In his
response to the e-mail, Alvarez asked Park twenty-four questions
about Trademax and the prospective shift in manufacturers. Alvarez
relied upon Park's answers to those questions and a phone
conversation he had with Park when assuring Southpoint executives
that Trademax was wholly owned by DADA's owners and would
manufacture caps to DADA standards.
At roughly the same time, representatives of AutoZone called
Southprint and H3 to inform them that AutoZone intended to give
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Southprint the chain-wide contract.1 Todd Hammett, a
manufacturer's sales representative hired to co-represent
Southprint to AutoZone, answered one such call from AutoZone on
Southprint’s behalf. Hammett stated that he did not consider the
AutoZone call to be a commitment from AutoZone, although he did
believe that Southprint would ultimately get AutoZone's business.
After receiving a similar call from AutoZone, Michael McGhee
of H3 began to make phone calls to various AutoZone
representatives. Testimony regarding the precise substance of
McGhee's calls varies, but recipients of McGhee’s calls testified
that McGhee asked many questions about Southprint's financial
stability, licensing agreements, and manufacturing capability.
According to the AutoZone representatives deposed, McGhee’s
questions were standard ones typically raised by vendors in such
circumstances. The Monday following AutoZone's calls to Southprint
and H3, Marilyn Hurst of AutoZone was asked by her superiors to
give Southprint and H3 another chance at the chain-wide contract.
Although AutoZone representatives never fully explained their
decision to reconsider the vendor for the Ford, Chevy, and Dodge
program, the AutoZone buyers testified that McGhee's calls did not
affect their decision.
1
Both parties give May 10, 2002 as the date of these calls,
but neither cites any spot in the record that pinpoints this date
as the crucial one. The relevant witnesses remember the call being
made on a Friday in May, but not on the tenth specifically.
5
On May 14 and 15, Southprint placed orders for hats with DADA,
ostensibly in reliance upon the call from AutoZone. At some point
on the fifteenth, Hurst contacted Hammett with inquiries arising
from McGhee's calls. By that date, AutoZone had received a second
bid from H3, a bid that would be parried by Southprint's second
bid on May 30. The day after Southprint submitted its second bid,
AutoZone notified the company that it had been selected as
AutoZone's chain-wide vendor for the Ford, Chevy, and Dodge
program.
On July 15, 2002, Southprint filed suit against H3 in the
United States District Court for the Western District of Virginia.
Southprint raised a claim under Section 43(a) of the Lanham Act and
three Virginia state-law claims: business defamation, tortious
interference with a contract, and tortious interference with a
business expectancy. In response to H3's motion for summary
judgment, the district court dismissed all Southprint's claims on
September 8, 2005. Southprint now appeals the dismissal of its
tortious interference and defamation claims.
II.
This Court reviews a decision granting or denying a motion for
summary judgment de novo. See Shaw v. Stroud, 13 F.3d 791, 798 (4th
Cir. 1994). Rule 56(c) of the Federal Rules of Civil Procedure
states that summary judgment shall be granted when "there is no
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genuine issue as to any material fact and [ ] the moving party is
entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c).
The substantive law identifies which facts are material, and
"[o]nly disputes over facts that might affect the outcome of the
suit under the governing law will properly preclude the entry of
summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248 (1986). To be genuine, the dispute must be over evidence that
would allow a reasonable jury to return a verdict for the nonmoving
party. See id. To prevail, the nonmoving party may not rest upon
the "mere allegations or denials of his pleading, but . . . must
set forth specific facts showing that there is a genuine issue for
trial." Id. (quoting First Nat’l Bank of Ariz. v. Cities Serv. Co.,
391 U.S. 253 (1968)).
III.
A.
Southprint first appeals the district court's dismissal of its
claim of tortious interference with Southprint's DADA purchase
orders. Southprint contends that H3 interfered with two purchase
orders, placed by Southprint with DADA on May 14 and 15, 2002, "by
demanding that DADA stop producing hats for Southprint."
(Appellant's Br. 27.) When H3 asked DADA to enter into an exclusive
production arrangement in April of 2002, however, the purchase
orders in question had not yet been placed. H3 could not,
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therefore, have tortiously interfered with the Southprint/DADA
contracts by asking DADA to enter into an exclusive manufacturing
agreement.
To support a claim for tortious interference with a contract
or business expectancy in Virginia, a plaintiff must show
(1) the existence of a valid contractual relationship or
business expectancy; (2) knowledge of the relationship or
expectancy on the part of the interferor; (3) intentional
interference inducing or causing a breach or termination
of the relationship or expectancy; and (4) resultant
damage to the party whose relationship or expectancy has
been disrupted.
Duggin v. Adams, 360 S.E.2d 832, 835 (Va. 1987) (quoting Chaves v.
Johnson, 335 S.E.2d 97, 102 (Va. 1985)). Southprint's DADA purchase
orders are dated May 14 and 15, 2002. DADA agreed to H3's proposal
of an exclusive relationship no later than April 17, 2002. As the
timing makes clear, H3's formation of an exclusive relationship
with DADA cannot form the basis of a tortious interference claim
because at the time H3 entered into the relationship, the
contractual relationship between Southprint and DADA in question
(the purchase orders) did not yet exist.
Southprint also seems to argue that a May 22, 2002, e-mail
from Scott Hines of H3 to Park of DADA constituted the tortious
interference of which Southprint complains. In that e-mail, Hines
reiterated H3's desire to maintain an exclusive relationship with
DADA and its intent to take its business elsewhere if DADA did not
respect that relationship. Hines also wrote: “DADA is not obligated
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to accept orders or produce for any customers. Even if you chose
not to produce for H3 then there would be nothing we could do about
it. We cannot force you to do business with us or can [sic] anyone
else.” (J.A. 66.) Hines did not, however, give any indication that
he was aware of any existing contractual relationships between DADA
and Southprint with which he and H3 might interfere.
Southprint contends that an e-mail from DADA to H3 sent the
day before Hines’s communication proves that H3 was aware of the
purchase orders. That e-mail mentions existing orders only once, in
the following fashion: "Even for alraedy [sic] placed
order(Ford,Chevy [sic] & Dodge),please [sic] kindly switch ..t
[sic] to the substitutive [sic] company." (J.A. 262.) This sentence
hardly gives H3 notice of an existing contractual relationship
between DADA and Southprint. Although it may have notified H3 that
Southprint had submitted an order to DADA, it certainly did not
advise H3 that two purchase orders existed and had been agreed to
by both companies. Without knowledge of the existence of a
contractual relationship with which to interfere, H3 could not have
tortiously interfered with a contract. See Duggin, 360 S.E.2d at
835. The district court's dismissal of Southprint's claim of
tortious interference with the purchase orders is therefore
affirmed.
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B.
Southprint next argues that H3 tortiously interfered with a
business expectancy between Southprint and DADA by pressuring DADA
into an exclusive relationship with H3. According to Southprint,
H3's April 2002 ultimatum to DADA—enter into an exclusive
manufacturing relationship with H3 or lose H3's sizeable
business—was improper and actionable under Virginia law. But
Southprint presents no evidence tending to establish a business
expectancy between Southprint and DADA in April 2002. Consequently,
its claim of tortious interference with that business expectancy
fails.
To prove the existence of a business expectancy, a party must
demonstrate an objective expectation of future business; “mere
proof of a plaintiff’s belief and hope that a business relationship
will continue is inadequate to sustain the cause of action.”
Commercial Bus. Sys., Inc. v. Halifax Corp., 484 S.E.2d 892, 301
(Va. 1997). The plaintiff must establish “a probability of future
economic benefit, not a mere possibility.” Id. Southprint has not
met this burden.
Southprint had done business with DADA in the past and did so
again after April 2002. In April 2002, however, Southprint did not
have reason to believe it had won the AutoZone contract, so it had
no objectively reasonable ground to expect imminent, AutoZone-
related business with DADA. Cf. RFE Indus., Inc. v. SPM Corp., 105
10
F.3d 923, 927 (4th Cir. 1997) (finding no valid business expectancy
under Virginia law where a supplier’s customers purchased goods on
an “as needed” basis with no commitment to future purchases).
Southprint did not even submit its bid to AutoZone until April 18,
the day after DADA released a letter announcing its new, exclusive
arrangement with H3. Indeed, Alvarez acknowledged that he had heard
from DADA of its exclusive deal with H3 "long before [the] May 10
date" on which AutoZone representatives ostensibly called
Southprint to notify the company it had won the chain-wide
contract. (J.A. 499.) Similarly, Southprint presents no evidence
that in April 2002 it was likely to secure Roush’s business and
rely upon DADA to meet Roush’s demand. Without an existing business
expectancy with which to interfere, H3 could not have committed
tortious interference by asking DADA to enter into an exclusive
relationship. See Duggin, 360 S.E.2d at 835. The dismissal of this
claim is affirmed.
C.
Southprint also appeals the district court's dismissal of
Southprint's claim alleging tortious interference with its business
expectancy with AutoZone. H3 concedes the existence of a business
expectancy between Southprint and AutoZone arising May 10, 2002,
and there is no dispute that H3 knew of that expectancy as of the
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Friday in May on which it arose. But Southprint’s business
expectancy did not evaporate; it was realized.
On May 31, 2002, one day after receiving Southprint’s revised
bid, AutoZone awarded Southprint the chain-wide contract.
Southprint claims to have been damaged to the extent that its
second bid was lower than its first, but never explains why its
business expectancy with AutoZone perished when AutoZone asked for
the second bid. Southprint did not negotiate the details of the
chain-wide contract with AutoZone during the May 10 phone call. Its
valid business expectancy did not extend to details not discussed
at that time. What business it could reasonably expect—to serve as
AutoZone’s vendor for whatever term AutoZone had specified—it
realized when AutoZone ultimately opted for Southprint. Without
loss of the business expectancy, there is no tortious interference.
Because Southprint never lost its business expectancy with
AutoZone, the district court's decision is affirmed.
D.
Finally, Southprint appeals the district court’s dismissal of
its claim of business defamation. In its brief, Southprint focuses
entirely upon statements allegedly made to AutoZone by McGhee,
arguing that McGhee’s comments cast doubt on Southprint’s business
capabilities. This doubt, Southprint asserts, caused AutoZone to
ask for a second bid, to Southprint’s detriment. The only
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potentially objectionable statement made by McGhee for which
Southprint presents any evidence, however, cannot be considered
defamatory under the applicable Virginia law. The district court’s
order, therefore, is affirmed.2
In its complaint, Southprint broadly alleged that H3 made
“false, misleading, and disparaging” statements about Southprint to
Southprint’s customers, and specifically claimed that McGhee told
Hurst, AutoZone’s buyer, “I know for a fact that they [Southprint]
do not have a Ford, Chevy and Dodge license.” (J.A. 17, 15.) In its
brief on appeal, Southprint highlights other allegedly defamatory
statements made by McGhee. In particular, Southprint points to the
recollections that AutoZone employees William Hull and William
Edwards have of conversations with McGhee. None of the incidents to
2
Southprint’s defamation claim should not, as H3 suggests, be
dismissed for having been pleaded improperly. Like any other civil
complaint in federal court not subject to heightened pleading
requirements, a defamation complaint must only provide a “short and
plain” statement of the claim that is sufficient to give the
defendant fair notice of the nature of the claim and the grounds
upon which it rests. See Hatfill v. N.Y. Times Co., 416 F.3d 320,
329 (4th Cir. 2005); see also Fed. R. Civ. P. 8(a)(2). Without
citing any authority, H3 contends that Southprint’s defamation
action should be dismissed because the complaint did not specify
that it would pursue a defamation per se claim. To state a claim
for defamation per se, though, a plaintiff need only allege “a
publication of false information concerning the plaintiff that
tends to defame the plaintiff’s reputation.” Hatfill, 416 F.3d at
330. Count II of Southprint’s complaint alleged that H3 knowingly
made “false, misleading, and disparaging statements” that “defamed”
Southprint and damaged its reputation in the industry. (J.A. 17.)
This formulation is sufficient to state a defamation per se claim
under the liberal, federal rules of pleading. See Hatfill, 416 F.3d
at 329; Fed. R. Civ. P. 8(a)(2).
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which Southprint points, however, suffice to defeat H3's motion for
summary judgment on the defamation claim.
McGhee's alleged statement to Hurst about Southprint's
licenses does not create a genuine issue of material fact because
there is no evidence that McGhee actually made the statement. The
only references to the statement outside Southprint's complaint are
found in the depositions of McGhee and Hurst. Unsurprisingly,
McGhee denies ever making the statement. Hurst denies ever hearing
it. At this stage of the litigation, Southprint cannot prevail
solely on the basis of its pleading but must present specific facts
showing that there is a genuine issue for trial. See Anderson, 477
U.S. at 248-49. It has not done so here.
Hull's recollections are insufficient to support a defamation
claim because he is unsure whether McGhee even made the statements
that Hull attributed to him. Asked if McGhee ever "specifically
questioned [Southprint's] sourcing capabilities,” Hull said:
I'm sure if we had that discussion, it would have been
something like, coming from [McGhee]: . . . You know,
I've heard or [Southprint's] been known to do-to make
promises and not fulfill. That's such a common discussion
that there's no doubt in my mind we headed down that path
at one point in time or another.
(J.A. 198.) The format of his answer makes clear that Hull was not
recalling the actual details of a specific conversation, but rather
dramatizing the likely contours of a discussion he assumed, on the
basis of his experience in these kinds of business deals, he must
have had. Such testimony cannot support a defamation action. Cf.
14
Gov’t Micro Res., Inc. v. Jackson, 624 S.E.2d 63, 69 (Va. 2006)
(upholding a finding of defamation when two witnesses could not
recall the exact words of the supposedly defamatory statement but
other persons testified as to its content).
Edwards, for his part, was more certain that he spoke with
McGhee about licenses but still a bit shaky on the details. He said
of a conversation with McGhee: "I don't believe he ever said: They
don't have licenses. I believe he questioned whether or not—I
believe the way he put it was: I'm not aware that anybody else has
the license and the ability to sell you the type of products that
we're talking about." (J.A. 227.) McGhee's alleged statements to
Edwards, even if made as Edwards believes they were, had no
tendency to defame.
Whether or not “a statement is capable of having a defamatory
meaning is a question of law to be decided by the court." Hatfill
v. N.Y. Times Co., 416 F.3d 320, 330 (4th Cir. 2005) (citing Yeagle
v. Collegiate Times, 497 S.E.2d 136, 138 (Va. 1998)). Although a
speaker may not escape liability for defamation by couching
defamatory statements in the language of opinion, see Hatfill, 416
F.3d at 333-43 & n.6, some statements made by commercial actors
about other commercial actors will not be considered defamatory,
even if false, see Chaves, 335 S.E.2d at 103. There are some
falsifiable claims, "made by one competitor against another," that
can only be considered a "relative statement of opinion, grounded
15
upon the speaker's obvious bias, and having no tendency to defame."
Id. McGhee’s statements to Edwards are such claims. Like the other
AutoZone representatives, Edwards testified that McGhee’s questions
were typical of vendors in this sort of situation, and that they
did not affect his decisions regarding Southprint in any way. Even
if it is true that McGhee said he was not aware anybody else had
the licenses H3 possessed, and even if Southprint in fact had the
licenses McGhee doubted it owned, McGhee's statements were not
defamatory.
IV.
For the foregoing reasons the decision of the district court
is affirmed and Southprint’s claims against H3 are dismissed.
AFFIRMED
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