Cooper v. Amana

Opinions of the United
1995 Decisions States Court of Appeals
for the Third Circuit
8-22-1995
Cooper v Amana
Precedential or Non-Precedential:
Docket 94-5569
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Recommended Citation
"Cooper v Amana" (1995). 1995 Decisions. Paper 231.
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
____________
No. 94-5569 and 94-5570
____________
COOPER DISTRIBUTING CO., INC.,
a New Jersey Corporation,
Appellant in 94-5570
v.
AMANA REFRIGERATION, INC.,
a Delaware Corporation,
Appellant in No. 94-5569
____________________
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
(D.C. Civ. No. 91-05237)
____________________
Argued: May 5, 1995
Before: SLOVITER, Chief Judge, ALITO, Circuit Judge
and SCHWARZER, Senior District Judge*
(Opinion Filed: August 22, 1995)
____________________
STEPHEN J. HOLTMAN, ESQ. (Argued)
DAVID A. HACKER, ESQ.
LEONARD T. STRAND
SIMMONS, PERRINE, ALBRIGHT & ELLWOOD
1200 Firstar Bank Building
Cedar Rapids, IA 52401-1266
Attorneys for Appellant and Cross-Appellee,
Amana Refrigeration, Inc.
FRANZBLAU DRATCH
A Professional Corporation
3 ADP Boulevard
Roseland, New Jersey 07068
_______________
1
*Hon. William W Schwarzer, Senior United States District Judge
for the Northern District of California, sitting by designation.
2
On the Brief:
KENNETH K. LEHN, ESQ. (Argued)
Of Counsel:
S. M. CHRIS FRANZBLAU, ESQ.
Attorneys for Appellee and Cross-Appellant,
Cooper Distributing Co., Inc.
BERTRAM P. GOLTZ, JR., ESQ.
Office of Attorney General of
New Jersey
124 Halsey Street
P. O. Box 45029
Newark, New Jersey 07101
For the Attorney General of the State of
New Jersey
____________________
OPINION OF THE COURT
____________________
ALITO, Circuit Judge:
Defendant Amana Refrigeration, Inc. ("Amana"), a
manufacturer of home appliances, appeals a judgment for
$9,375,000 in favor of plaintiff Cooper Distributing Co., Inc.
("Cooper"), a distributor of Amana home appliances. After
supplying Cooper with its products for approximately 30 years,
Amana attempted to terminate its relationship with Cooper. Cooper
sued, claiming that the termination and the circumstances
surrounding it gave rise to a variety of state law claims. At
trial, Cooper asserted four claims against Amana: (1) illegal
termination of a franchise, in violation of the New Jersey
Franchise Practices Act ("NJFPA" or "the Act"), N.J.S.A. § 56:10-
1 et seq.; (2) breach of contract; (3) breach of the implied
3
obligation of good faith and fair dealing; and (4) tortious
interference with prospective business advantage. At the
conclusion of a five-week trial, the jury returned a verdict of
liability on all four counts and awarded damages as follows: (1)
$4.375 million on Cooper's NJFPA claim, (2) $2 million on
Cooper's breach of contract claim, (3) $0 on Cooper's claim for
breach of the obligation of good faith and fair dealing, (4) $0
in actual damages on Cooper's tortious interference claim, and
(5) $3 million in punitive damages on Cooper's tortious
interference claim. The district court upheld the entire
$9,375,000 verdict and denied Amana's post-trial motions
attacking the liability verdicts on Cooper's NJFPA, the breach of
contract, and the tortious interference claims.
Amana appeals from the district court's denial of these
motions, and Cooper cross-appeals from the district court's
denial of its motion for prejudgment interest on its NJFPA claim.
For the reasons discussed below, we (1) affirm the district
court's denial of Amana's post-trial motions attacking the NJFPA
claim, (2) reverse the district court's denial of Amana's motion
for a new trial on NJFPA damages, remanding for a new trial on
damages, (3) reverse the district court's denial of Amana's
motion for judgment as a matter of law on the breach of contract
claim, (4) reverse the award of punitive damages on Cooper's
tortious interference claim, and (5) affirm the denial of
Cooper's motion for prejudgment interest on its NJFPA claim.
I. FACTS AND PROCEDURAL HISTORY
4
Amana began to manufacture home appliances in the
1940's. App. 3954. Currently, Amana is a "full line" home
appliance manufacturer: it offers for sale a full set of home
appliances, including refrigerators, cooking and laundry
appliances, dishwashers, and air conditioners. App. 680. For
many years, Amana employed a two-step process in the distribution
of its products. It would sell its products to a network of
independent wholesale distributors, who, pursuant to agreements
with Amana, would sell to retail dealers located in the wholesale
distributors' contractually recognized sales regions. The retail
dealers would then sell the products to consumers.
Cooper began operating as an independent wholesale
distributor in 1931. App. 3954. In 1961, Cooper started to
distribute Amana products. Cooper and Amana signed an agreement
permitting Cooper to distribute Amana's products in New Jersey
and New York and have periodically signed new agreements over the
years. Their most recent Distribution Agreement (the
"Agreement"), which was signed in 1990, allowed Cooper to
distribute Amana products in New Jersey, New York, Connecticut,
and Pennsylvania. App. 3978-3983. The Agreement stated that it
was to be construed "in accordance with the laws of the State of
Iowa." App. 3982.
Beginning in the late 1970's, the majority of Cooper's
business (78% to 100%) was derived from the sale of Amana
products. App. 644. Cooper also distributed other major brands
of appliances, including Hardwick, In-Sink-Erator, and Dacor,
5
Ohio App. 959, although Amana occasionally subjected Cooper to
competitive restraints. App. 961-62.
During its relationship with Amana, Cooper operated a
showroom/marketing center, first in Newark and subsequently in
Englewood Cliffs, New Jersey. Cooper used this facility for
Amana product demonstrations, App. 2005-08, dealer training in
Amana products, App. 2006, and dealer open houses. App. 690.
Cooper's sales managers studied the Amana product line, App.
2013-2017, and in turn gave Amana product training to retail
dealers. App. 690-92. Cooper also placed Amana advertisements
in the yellow pages and newspapers, App. 1021-22, advertised as
an authorized Amana servicer, App. 4016-17, instructed its
servicemen to wear Amana uniforms, App. 1963, distributed
promotional items bearing the Amana name, App. 1023, and,
pursuant to the Agreement, promised to "use its best efforts to
promote sales" of Amana products. App. 3979. Cooper's dealers
perceived Amana and Cooper as being one and the same. App. 1748.
In the early 1980's, the marketing of appliances began
to change, and by the late 1980's most full-line manufacturers
had eliminated the first step in the two-step distribution
process. App. 1169, 1679-81. Instead of selling to wholesale
distributors, the manufacturers sold directly to retail dealers.
Consistent with this trend, Amana started to depart from its
previous practice of selling its products to the wholesale
distributors. Instead, Amana began to sell directly to certain
retail dealers located in the wholesale distributors' sales
regions. Amana first sold its appliances directly to "national"
6
retail dealers like Sears. App. 988. The Agreement explicitly
permitted Amana to make such sales to national retailers. App.
3981. Then, in the summer of 1991, Amana went further. Relying
on a provision of the Agreement that reserved for Amana the
"right to make sales directly," App. 3981, Amana began to deal
directly for the first time with a non-national retail dealer in
Cooper's region, P.C. Richard & Son ("P.C. Richard"). P.C.
Richard had a chain of 20 retail stores and represented Cooper's
largest account. App. 3955. Amana also sold its products
directly to other smaller local retail dealers. Until Amana
began selling to the national and local retailers, Cooper had
been the exclusive distributor in its region for nearly 30 years.
App. 988, 2504-06.
At the same time that the home appliance industry saw
the elimination of two-step distribution, Amana's marketing
responsibilities changed. Amana's parent company, Raytheon,
which also sold other appliance brands such as Speed Queen and
Caloric, decided to consolidate the distribution of its brands.
App. 2322-23. The result was that several of the distributors
that sold one but not all of Raytheon's brands were eliminated.
In November 1991, Amana terminated its relationship with Cooper
pursuant to a provision of the Agreement that allowed either
party to terminate the Agreement on ten days written notice. App.
3981. At the same time, Amana also terminated its relationships
with 20 of the other 23 remaining Amana wholesale distributors
across the country. App. 2825.
7
In response to its termination, Cooper commenced this
action in New Jersey state court alleging, among other things,
that Amana had (1) violated section 5 of the NJFPA, N.J.S.A.
§56:10-5, by terminating Cooper's franchise without good cause;
(2) breached the 1990 Agreement by selling to the local
retailers in Cooper's region; (3) breached the Agreement's
implied obligation of good faith and fair dealing; and (4)
tortiously interfered with Cooper's prospective economic
advantage. App. 26-46. In November 1991, the state court issued
a temporary restraining order prohibiting termination of or
interference with Cooper's Amana distributorship. App. 2157.
After the case was removed by Amana to federal court,0 a
preliminary injunction was entered on February 10, 1992,
enjoining Amana "from taking any action whatsoever to limit . . .
or in any way interfere with Cooper's activities as a distributor
of Amana products."0 App. 100-54, 2157.
During the pendency of the injunction, Amana dropped
Cooper from its mailing list, thereby allegedly leaving Cooper --
and Cooper's retail dealers -- unaware of Amana discounts and
model changes. App. 1067-73. Additionally, Amana refused to
support Cooper in its attempt to sell Amana air conditioners to
0
Cooper was incorporated and had its principal place of business
in New Jersey; Amana was a Delaware Corporation with its
principal place of business in Amana, Iowa. The district court
properly exercised jurisdiction pursuant to 28 U.S.C. § 1441.
0
The Attorney General of the State of New Jersey intervened
because Amana raised a Commerce Clause challenge to the
extraterritorial application of the NJFPA. We have since held
that the NJFPA does not violate the Commerce Clause. See
Instructional Systems, Inc. v. Computer Curriculum Corp. 35 F.3d
813 (3d Cir. 1994), cert. denied, 115 S. Ct. 1176 (1995).
8
Trader Horn, one of Cooper's larger retail dealers. App. 1047-
61.
Trial commenced in February 1994, and after five weeks
the jury returned a verdict for Cooper totalling $9.375 million.
The jury first found that Cooper had proved that it possessed a
franchise under the NJFPA and that Amana's attempted termination
violated the Act. For this violation, the jury awarded Cooper
$4.375 million in compensatory damages, a sum that corresponded
to the value of the franchise in November 1991, as estimated by
Cooper's expert. The jury also awarded Cooper $2 million on its
breach of contract claim, finding that the Agreement had granted
Cooper an exclusive regional distributorship and that Amana had
violated the Agreement by selling directly to P.C. Richard and
other local retailers. The jury likewise found for Cooper on its
claims for breach of the implied covenant of good faith and fair
dealing and for tortious interference with prospective business
advantage. With respect to the tortious interference claim, the
jury found that Amana had tortiously interfered with Cooper's
business relations both by its direct sales to Cooper's local
retail dealers and by other unjustifiable conduct occurring after
the entry of the preliminary injunction. Although the jury
awarded no actual damages to Cooper on either the implied
covenant or tortious interference claims, it did award $3 million
in punitive damages on the tortious interference claim.
After trial, the district court entered judgment for
Cooper in the amount of $9,375,000 and dissolved the preliminary
injunction. App. 5000-02. Amana moved for post-trial judgment
9
as a matter of law pursuant to Fed. R. Civ. P. 50(b) and,
alternatively, for a new trial pursuant to Fed. R. Civ. P. 59(a).
Amana argued: (1) that it was entitled to a judgment or a new
trial as to liability under the NJFPA; (2) that it was entitled
to a new trial as to damages on the NJFPA claim; (3) that it was
entitled to a judgment or a new trial as to liability for breach
of contract; (4) that it was entitled to judgment on the tortious
interference claim; and (5) that it was entitled to judgment or a
new trial on the issue of punitive damages. App. 4927-77.
Cooper moved for attorneys' fees and costs under the
NJFPA and for prejudgment interest on its breach of contract and
NJFPA recoveries. The district court rejected all of Amana's
post-trial arguments, App. 5702-25, and awarded Cooper attorneys'
fees and costs, App. 5726-36, and prejudgment interest on the
breach of contract claim. However, the district court denied
Cooper's request for prejudgment interest on the NJFPA claim.
App. 5737-41. Amana appealed, challenging the denial of its
post-trial motions. Cooper cross-appealed, seeking additional
prejudgment interest. We turn first to the NJFPA issues.
10
II. NEW JERSEY FRANCHISE PRACTICES ACT
Prompted in large part by the practices of automobile
manufacturers and major oil companies, New Jersey enacted the
NJFPA in 1971. See Instructional Systems, Inc. v. Computer
Curriculum Corp., 614 A.2d 124, 132 (N.J. 1992) (hereinafter
"ISI"). The Act protects franchisees against indiscriminate
termination by providing that "it shall be a violation of this
act for a franchisor to terminate, cancel, or fail to renew a
franchise without good cause." N.J.S.A. § 56:10-5. A franchise
exists under the NJFPA if: (1) there is a "community of interest"
between the franchisor and the franchisee; (2) the franchisor
granted a "license" to the franchisee; and (3) the parties
contemplated that the franchisee would maintain a "place of
business" in New Jersey. N.J.S.A. §§ 56:10-3a,-4. Contending
that it was not properly held liable under the NJFPA, Amana
argues, first, that as a matter of law Cooper was not a
"franchisee" under the Act0 and second, that the district court
gave the jury prejudicially erroneous instructions on the NJFPA
claim. We will discuss each of these arguments in turn.
A. Franchisee as a matter of law.
0
Amana does not argue that the termination of its business
relationship with Cooper was for "good cause," a concept that is
"limited to failure by the franchisee to substantially comply
with those requirements imposed upon him by the franchise."
N.J.S.A. § 56:10-5; see also Westfield Centre Services, Inc. v.
Cities Service Oil Co., 432 A.2d 48, 55 (N.J. 1981) (holding that
a franchisor who in good faith and for bona fide reasons
terminates a franchise for any reason other than substantial
nonperformance has violated the Act).
11
In reviewing a district court order denying a post-
trial motion for a Rule 50(b) judgment as a matter of law, we
"determine whether the evidence and justifiable inferences most
favorable to the prevailing party afford any rational basis for
the verdict." Intermilo, Inc. v. I.P. Enterprises, Inc., 19 F.3d
890, 892 (3d Cir. 1994) (quoting Bhaya v. Westinghouse Elec.
Corp., 832 F.2d 258, 259 (3d Cir. 1987), cert. denied, 488 U.S.
1004 (1989)); see also Cassidy Podell Lynch, Inc. v.
SnyderGeneral Corp., 944 F.2d 1131, 1137 (3d Cir. 1991). We will
apply this standard to each of the three franchise requirements.
1. Community of interest.
The NJFPA requires a franchisee to show that it has a
"community of interest" with a franchisor. N.J.S.A. § 56:10-3a.
The New Jersey Supreme Court has explained:
Community of interest exists when the terms
of the agreement between the parties or the
nature of the franchise business requires the
licensee, in the interest of the licensed
business's success, to make a substantial
investment in goods or skills that will be of
minimal utility outside the franchise.
ISI, 614 A.2d at 1 (quoting Cassidy, 944 F.2d at 1143). The
court continued:
The Act's concern is that once a business has
made substantial franchise-specific
investments [which are of minimal utility
outside the franchise,] it loses virtually
all of its bargaining power. . . .
Specifically, the franchisee cannot do
anything that would risk termination, because
that would result in a loss of much or all of
the value of its franchise-specific
investments. Thus, the franchisee has no
choice but to accede to the demands of the
12
franchisor, no matter how unreasonable these
demands may be.
ISI, 614 A.2d at 141; see also Neptune T.V. & Appliance Service,
Inc. v. Litton Microwave Cooking Products Div., 462 A.2d 595, 601
(N.J. Super. Ct. App. Div. 1983) (looking to the "vulnerability
of the alleged franchisee").
Thus, in order to find a "community of interest," two
requirements must be met: (1) the distributor's investments must
have been "substantially franchise-specific", ISI, 614 A.2d at
141, and (2) the distributor must have been required to make
these investments by the parties' agreement or the nature of the
business. N.J.S.A. § 56:10-3a. New Jersey American, Inc. v. The
Allied Corporation, 875 F.2d 58, 64 (3d Cir. 1989); see also Colt
Industries, Inc. v. Fidelco Pump & Compressor Corp., 844 F.2d
117, 120-121 (3d Cir. 1988) (affirming district court's finding
of a lack of community of interest because the franchise-specific
investments were "suggested, not required"). In this appeal,
Amana has not addressed the second of these requirements,0 but
0
Because Amana's briefs do not raise or address the question
whether Cooper was required to make any franchise-specific
investments that were made, we do not believe that that question
is properly before us. In any event, however, we believe that
there was sufficient evidence to satisfy this requirement. The
nature of the business required Cooper to acquire Amana-specific
knowledge since, without such knowledge, it would have been
unable to educate the retail dealers about Amana's unique
products. Amana conceded that such dealer training was "vital"
to the successful marketing of Amana products. App. 834, 2012.
In addition, the nature of the home appliance industry mandated
that Cooper make certain goodwill investments, like purchasing
advertising, that benefitted Amana. App. 1566. Also, Cooper was
required to implement marketing strategies that were dictated by
Amana and were designed to create goodwill. App. 834-35.
Finally, although Cooper was not required to limit its
13
Amana has strenuously argued that Cooper failed to meet the first
of these requirements, i.e., that it failed to show that its
investments were substantially franchise-specific.
The question of substantial franchise-specificity
depends on whether Cooper's investments were "useful beyond the
relation the contract in question create[d]." Cassidy, 944 F.2d
at 1144. Amana argues that Cooper's investments -- specifically
(1) Cooper's knowledge of home appliances, (2) its goodwill, and
(3) its tangible assets -- were "tremendously useful" outside the
context of its relationship with Amana, New Jersey American, 875
F.2d at 64, and therefore were not substantially franchise-
specific.0 Although we do not find Cooper's evidence on this
point to be overwhelming, we conclude that a reasonable jury
could have found that Cooper's assets were substantially
franchise-specific.
First, we note that Cooper made a significant
investment in the acquisition of knowledge about Amana products.
In Cassidy, we held that a franchise-specific investment could
take the form of the "years of effort required to gain
specialized skills or knowledge valuable to market the licensed
product efficiently, but of little use beyond that." Cassidy,
distributing solely to Amana products, App. 959, Amana imposed
various competitive restraints. App. 961-62, 171-172. Thus, a
reasonable jury could have concluded that Cooper was required to
make its franchise-specific investments.
0
As an example of a franchise-specific investment, the New Jersey
Supreme Court noted that "McDonald's franchisees were required
for many years to purchase and install ``Golden Arches,' which
[would be] of little value if the franchise were lost." ISI, 614
A.2d at 141.
14
944 F.2d at 1144. Here, Cooper introduced evidence that its
employees invested much time over the years in acquiring
knowledge about Amana products and that this knowledge was not
transferable outside the Amana-franchise context. Robert Nathan,
a Cooper sales manager, testified that he spent 200 hours a year
(10% of his time) learning about Amana products, App. 2013, and
that much of what he and his sales force learned during this time
related to Amana products that contained "exclusive or unique
features not generally found in comparable products performing
the same purpose in the marketplace." App. 2014; see also App.
2015-17; 1964-70 (identifying unique Amana features). He added
that this knowledge would be "of no value," App. 2027, and
"useless," App. 1968-69, outside the realm of Amana sales.0
Second, and perhaps most important, a reasonable jury
could find that one of Cooper's most important assets was
franchise-specific goodwill. It is clear that goodwill can
constitute a franchise-specific asset. See New Jersey American,
875 F.2d at 62; ISI, 614 A.2d at 144; Neptune, 462 A.2d at 599.
To qualify, however, the goodwill in question must be useful for
0
Amana contends that since its products change yearly, Cooper's
knowledge of Amana's products would become obsolete in time.
Therefore, Amana maintains, the termination did not cause Cooper
to lose the value of its franchise-specific knowledge. This
argument, however, merely shows that Cooper's Amana-specific
knowledge, like virtually any other asset, was subject to
depreciation. Thus, this argument does not show that Cooper's
Amana-specific knowledge was valueless. On the contrary, we
believe that a reasonable jury could conclude that, as of the
date of termination, Cooper's Amana-specific knowledge still
retained substantial value. See, e.g., App. 2012-19 (sales
manager Nathan discussing how his vast product knowledge would be
rendered useless by termination).
15
the alleged franchisee only in the context of its relationship
with the alleged franchisor. Moreover, if a distributor sells
the products of many manufacturers and creates some goodwill for
all or many of these manufacturers, that kind of goodwill "cannot
be enough to create a ``community of interest.'" ISI, 614 A.2d at
141.0
In this case, it is undisputed that Cooper's
investments created goodwill. See App. 1023 (promotional items
bearing the Amana name); App. 1021-22 (yellow page and newspaper
advertising of Amana products); App. 1025 (in-store
demonstrations of Amana products). Further, there is evidence in
the record that goodwill accounted for nearly half the value of
the Cooper franchise. App. 1813-16, 4605 (Cooper valuation
expert, Melvin Konner, determining the value of the franchise and
the portion of the value attributable to goodwill).
In addition, Cooper provided substantial evidence that
much of this goodwill was not transferable. For example, sales
0
As the ISI court elaborated:
To develop goodwill generally for a product
cannot be enough to create a community of
interest. Otherwise, any licensee
distributing a brand-name product could claim
it has a community of interest with its
supplier. For example, a department store
selling Sony name products could claim a
community of interest with the manufacturer
despite the fact that the department store's
goodwill investments are not intimately tied
to the manufacturer and therefore lack the
economic character of genuine franchise
investments.
614 A.2d at 141.
16
manager Nathan explained that it was not possible for Cooper's
salespeople, after representing for many years that Amana's
products were superior, to claim, after the termination, that
another product was even better. App. 3238 ("I've been telling
everybody Amana's the greatest thing since love the last 12
years, and now I got to go out and say wait a second, we have
this other line called Friederich, it's the greatest thing since
love. Who's going to believe that."). Even Michael Napoletano,
a retail dealer who testified for Amana, admitted that Cooper
would have a credibility problem if it took such an approach.
App. 2806-07.
This point is supported by the New Jersey Supreme
Court's decision in ISI. There, the court held that Computer
Curriculum Corp. ("CCC"), a producer of computer learning
systems, had a community of interest with Instructional Systems,
Inc. ("ISI"), a regional distributor of CCC's products. Part of
the reason that the court found the existence of a community of
interest was that ISI's previous efforts at creating goodwill for
CCC's products gave rise to a credibility problem for ISI outside
the CCC context. The court explained:
For close to twenty years, ISI has persuaded
its customers to choose the CCC's system. The
goodwill . . . would vanish in the event of a
termination.
ISI, 614 A.2d at 144; see also id. ("ISI's competitors, including
CCC, would denigrate ISI with references to its prior endorsement
of the CCC product line.").
17
It is also noteworthy that Cooper's customers, the
retail dealers, viewed Cooper and Amana as "one and the same."
App. 2796-97; see also id. at 1748 ("Amana was Cooper, Cooper was
Amana"). This fact lends support to the conclusion that Cooper's
investments in goodwill were not transferable. See ISI, 614 A.2d
at 145 (relying on the fact that "the evidence revealed that
ISI's customers considered ISI and CCC as synonymous").
Finally, we consider Cooper's investments in tangible
assets. The NJFPA protects franchise-specific "tangible capital
investments, such as ``a building designed to meet the style of
the franchise, special equipment useful only to produce the
franchise product, and franchise signs.'" ISI, 614 A.2d at 141
(quoting New Jersey American, 875 F.2d at 62). In this case,
Cooper introduced evidence showing that it had invested in some
tangible items that were of no value outside the Amana-franchise
context -- for example, the display housing for Cooper's
showroom bearing the Amana logo, App. 1034, Amana product
literature, App. 1032, and Amana demonstration models.
We do not mean to imply that all of Cooper's
investments were Amana-specific. On the contrary, the record
shows that Cooper possessed assets that would clearly be useful
outside the Amana context. See, e.g., App. 1041 (electronic mail
system), App. 1032-22 (computer system), App. 1036-37 (repair
tools).0 However, the jury was not required to find that
0
The parties dispute whether Cooper's investment in Amana
inventory, App. 3343-45, and whether its investment in the
showroom, the parts display area, and the service office, App.
1034-38, were franchise-specific. Because we believe that
18
Cooper's investments were entirely franchise-specific but merely
that they were "substantial[ly] franchise-specific." ISI, 614
A.2d at 141 (emphasis added). Looking at all of the evidence of
Cooper's investments in the light most favorable to Cooper, we
hold that a jury reasonably could conclude that Cooper's assets
were substantially franchise-specific.
This holding is supported further by the fact that, as
of the termination, 85% of Cooper's revenues were derived from
Amana products. App. 664, 679-80, 987-88.0 While we have held
that dependence on a single supplier cannot automatically qualify
a distributor for protection under the Act (or else "all
exclusive distributors could unilaterally decide to convert their
distributorships into franchises," Cassidy, 944 F.2d at 1141),
the New Jersey Supreme Court has characterized economic
dependence as perhaps the "most important" factor in determining
whether a community of interest exists. ISI, 614 A.2d at 145.
2. License.
Before a party may be deemed a "franchisee" subject to
the Act's protections, it must show that it has been granted "a
license to use a trade name, trade mark, service mark, or related
Cooper's investments were substantially franchise-specific even
if these particular investments were not, we need not decide
these disputes.
0
The Act states that a distributor cannot be a franchisee if it
derives 20% or less of its gross sales from its franchisor, see
N.J.S.A. § 56:10-4, implying "that a firm may be a franchise even
if only 21% of its gross sales are derived from the franchisor."
New Jersey American, 875 F.2d at 63.
19
characteristic[]." N.J.S.A. § 56:10-3a. The New Jersey Supreme
Court has explained that "the Act's ``license to use' requirement
does not encompass a definition of license in the word's broadest
sense, that is: permission to do something [that] without the
license would not be allowable." ISI, 614 A.2d at 138.
Accordingly, the mere fact that Cooper was permitted to use the
Amana insignia, an act that would normally "not be allowable" due
to trademark laws, did not in itself create a license. Otherwise,
"any business selling a name brand product would, under New
Jersey law, necessarily be considered as holding a license."
ISI, 614 A.2d at 138 (quoting Colt Industries, Inc. v. Fidelco
Pump & Compressor Corp., 844 F.2d 117, 120 (1988)). Instead, the
term "license" is more narrowly defined. It means "to use as if
it is one's own. It implies a proprietary interest . . . ."
Finlay & Assoc., Inc. v. Borg-Warner Corp., 369 A.2d 541, 546
(N.J. Super. Ct. Law Div. 1976), aff'd on other grounds, 382 A.2d
933 (N.J. Super. Ct. App. Div.), certif. denied, 391 A.2d 483
(N.J. 1978). The New Jersey Supreme Court has further explained:
At a minimum, the term "license" means that
the alleged franchisee must use the name of
the franchisor "in such a manner as to create
a reasonable belief on the part of the
consuming public that there is a connection
between the . . . licensor and the licensee
by which the licensor vouches, as it were,
for the activity of license." Neptune, 402
A.2d at 599.
ISI, 614 A.2d at 138; see also Neptune, 462 A.2d at 599 (noting
that the hallmark of a license is that the franchisor gives its
20
approval to the franchisee's business enterprise with regard to
the franchisor's product such that the public is induced "to
expect from [the franchisee] a uniformly acceptable and quality
controlled service endorsed by [the franchisor] itself").
Amana maintains that it did not vouch for Cooper's
activities in relation to the Amana name. We hold, however, that
a reasonable jury could have inferred the existence of a
"license" based on various aspects of the lengthy Amana-Cooper
relationship. We note that Cooper's showroom displayed the Amana
sign, App. 723-24, and Cooper's servicemen wore Amana uniforms.
App. 1963, 4077. In these respects, this case resembles Cassidy,
where the distributor "maintained signs bearing [the
manufacturer's] name" at its facility and employed "servicemen
[who] wore uniforms bearing the [manufacturer's] tradename."
Cassidy, 944 F.2d at 135.
There was also evidence that Cooper's employees, like
those of the plaintiff in ISI, were "integrally related" to the
proper functioning of Amana products, ISI, 614 A.2d at 139, and
this relationship could reasonably be viewed as likely to
strengthen the public perception that Amana vouched for Cooper's
use of its name. The Agreement required Cooper to give
"warranty" service on the Amana product line. App. 3801, 794.
Cooper advertised as a "servicer" of Amana products, App. 4016-
17, and on occasion made in-home visits to consumers with product
problems. App. 1743-44. Cooper was responsible for fixing
certain defective Amana products, App. 809-810, was an
"authorized [Amana] parts distributor," App. 4011-4014, and could
21
give "factory authorized service." App. 4016-17. Amana itself
also emphasized that Cooper's customer service was important so
that customers would distinguish Amana from other manufacturers,
App. 808, and Amana stressed that it was "vital" for Cooper to
train its dealers in the "unique" features of Amana products.
App. 834. See also App. 17, 2012.0
It is likewise noteworthy that Cooper was the exclusive
Amana distributor to local dealers in Cooper's four-state
territory for 30 years, App. 988, 2504-06, and that Amana allowed
Cooper to maintain advertisements in the yellow pages and
newspapers stating that it was an authorized distributor and
servicer of Amana products. App. 4011-21. In ISI, the New
Jersey Supreme Court found these factors to be highly important.
See ISI, 614 A.2d at 139-140.0
0
Amana argues that ISI is distinguishable since the court there
noted that the franchisee "educate[d] and train[ed] users" of the
franchisor's product, ISI, 614 A.2d at 139 (emphasis added),
while Cooper only trained dealers. We can see no significance in
this distinction for present purposes. Under the Agreement,
Cooper sold to dealers, not consumers. App. 3979. It therefore
follows that the public, for the purposes of determining whether
a perception existed that Amana vouched for Cooper, must be the
dealers, not the consumers. This is buttressed by the fact that
the Act expressly applies to wholesalers, who do not typically
sell to consumers. See N.J.S.A. § 56:10-3(a) (noting that Act
applies to "the marketing of goods or services at wholesale,
retail, . . . or otherwise") (emphasis added).
0
Amana claims that ISI is distinguishable in this regard because
ISI was required to hold itself out as a CCC distributor, see ISI
614 A.2d at 139, whereas Cooper was merely allowed to hold itself
out as an Amana distributor. We find this distinction to be
without merit because in Neptune, a case upon which the ISI court
relied heavily, the court found a license despite the fact that
the plaintiff was merely allowed to hold itself out as an
authorized service center for the defendant. See Neptune, 462
A.2d at 599.
22
It is also significant that Cooper was required under
the Agreement to use its best efforts to promote Amana sales.
App. 3979. In ISI, the New Jersey Supreme Court found it
significant that the franchisee was required to use its best
efforts to promote the franchisor's name. 614 A.2d at 139.0
Amana tries to distinguish ISI by pointing to the difference
between promoting the sale of a company's products and promoting
its name. See Liberty Sales Assoc., Inc. v. Dow Corning Corp.,
816 F. Supp. 1004, 1011 (D.N.J. 1993). However, at least in the
context of this case -- where Cooper sold Amana's entire product
line and was Amana's sole distributor to dealers within the
relevant region for 30 years -- this distinction is ephemeral.
Finally, there was additional testimony by Cooper's
dealers and by Amana witnesses that strongly suggested that a
"license" was present. Retail dealer Michael Napoletano, who
testified for Amana, admitted that "Amana vouches for Cooper by
standing behind the quality of what it sells." App. 2792.
Moreover, the dealers perceived a "special relationship" between
Amana and Cooper. ISI, 614 A.2d at 140 (quoting Finlay, 369 A.2d
at 546). Dealers would address letters to Cooper as "Cooper
Distributors, c/o Amana," App. 4101, and many dealers regarded
Amana and Cooper as being "one and the same." App. 1748; see
0
Cf. Cassidy, 944 F.2d at 1138 (distributor required to "use its
best efforts to diligently promote the sale of [the
manufacturer's products"); Neptune, 462 A.2d at 599
(distinguishing other cases where the plaintiff did not use its
best efforts to promote sales).
23
also App. 1914 (testimony of a retail dealer that the dealers
"always felt that Amana was sold through Cooper").
We recognize that Amana provided important evidence
suggesting that it did not grant Cooper a license. Nevertheless,
taking all the evidence together, we hold that a reasonable jury
could have inferred that there was a public perception that Amana
vouched for Cooper's activities in relation to the Amana name.0
3. New Jersey place of business.
The NJFPA applies only to an agreement "the performance
of which contemplates or requires the franchisee to establish or
maintain a place of business within the State of New Jersey."
N.J.S.A. § 56:10-4. In order to satisfy this third requirement,
Cooper was required to show that the Agreement contemplated (1)
that Cooper would operate a place of business ("POB") within the
meaning of the NJFPA and (2) that this POB would be located in
New Jersey.
0
The fact that Cooper did not operate under Amana's trade name
does not mandate a contrary result. The New Jersey Supreme Court
has expressly held that independently-named franchisees may still
have a license from the franchisor. As that court explained:
[T]he inclusion of independently-named
businesses is implicit in the Act's
definition of franchise by the Act's
limitation to a franchise "where more than
20% of the franchisee's gross sales are
intended to be or are derived from such
franchise." N.J.S.A. 56:10-4(3).
ISI, 614 A.2d at 140. "Therefore," the Court concluded, "if only
a ``mirror-image' relationship could constitute a franchise, the
legislature would have added a superfluous requirement . . . that
the franchise sales constitute twenty percent of the entire
business." Id.
24
The NJFPA defines "place of business" as:
a fixed geographical location at which the
franchisee displays for sale and sells the
franchisor's goods or offers for sale and
sells the franchisor's services. Place of
business shall not mean an office, warehouse,
a place of storage, a residence or a vehicle.
N.J.S.A. § 56:10-3(f).
Cooper maintains that its showroom/marketing center in
Englewood Cliffs, New Jersey, constituted a POB. There is ample
evidence in the record that Cooper regularly used this facility
for activities that were an integral part of the sales process.
For example, the record shows that this facility was often used
for product demonstrations, App. 2007-08 (sales manager Nathan
met once a week with customers in showroom); App. 2005 (Nathan's
three salesmen each used showroom two to four times a week for
demonstrations), for dealer training, App. 2006-09, and dealer
open houses. App. 690. Amana argues, however, that this
facility was not a POB because Cooper did not actually consummate
sales there. See App. 1346-1404, App. 692, App. 1231, App. 1351-
52. Relying on the statutory definition of a POB as a fixed
location where "the franchisee displays for sale and sells the
franchisor's goods," N.J.S.A. § 56:10-3(f) (emphasis added),
Amana argues that the statute requires both activity leading up
to the sale ("displays for sale") and the sale itself ("sells").
See Greco Steam Cleaning, Inc. v. Associated Dry Goods Corp., 608
A.2d 1010, 1013 (N.J. Super. Law Div. 1992). Consequently, Amana
argues, Cooper's showroom did not constitute a POB within the
meaning of the Act.
25
We are constrained to disagree. As a federal court
sitting in diversity, "we are not free to impose our own view of
what state law should be; we are to apply state law as
interpreted by the state's highest court." McKenna v. Pacific
Rail Service, 32 F.3d 820, 825 (3d Cir. 1994). Where a state's
highest court has not squarely addressed an issue, we "must be
governed by a prediction of how the state's highest court would
decide were it confronted with the problem." McKenna v. Ortho
Pharmaceutical Corp., 622 F.2d 657, 661 (3d Cir.), cert. denied,
449 U.S. 976 (1980). Relying on ISI, we predict that the New
Jersey Supreme Court would hold that Cooper's activities at its
showroom/marketing center were sufficient to constitute "sales"
for purposes of the NJFPA.
In ISI, the New Jersey Supreme Court, in finding that
ISI's Hackensack facility was a POB, noted that ISI "ha[d] been
giving more than one hundred demonstrations a year" at that
facility, ISI, 614 F.2d at 138, and that ISI had used the
facility to acquaint prospective purchasers with the functioning
of its product. See id. The court made no mention of any actual
sales at the facility but instead relied exclusively on the
demonstrations and inspections -- the very same types of
activities that took place at Cooper's Englewood Cliffs facility.
The New Jersey Supreme Court summarized its holding as follows:
In short, the record sustains the trial
court's finding that ISI set up a marketing
facility in Hackensack where its customers,
education professionals, can inspect the CCC
computer system and receive a sales
demonstration on the operation of its
computer product. ISI's Hackensack facility
26
thus could be found to constitute a "place of
business" under the Act.
ISI, 614 A.2d at 138. Based on ISI, we feel compelled to predict
that the New Jersey Supreme Court, if confronted with this case,
would hold that Cooper's showroom/marketing center was a POB.0
Apart from requiring Cooper to establish that the
showroom was a POB, the statute also obligated Cooper to show
that the parties contemplated or required that the POB be located
in New Jersey. See N.J.S.A. § 56:10-4; see also Finlay, 369 A.2d
at 545. The ISI court explained that "a franchise would be
governed by the Act whether the contract required a place of
business in New Jersey or whether the parties reasonably
anticipated that the franchisee would establish a New Jersey
place of business." ISI, 614 A.2d at 136.
We hold that a reasonable jury could have found that
the parties "reasonably anticipated" that Cooper would establish
a New Jersey POB. Throughout its 31-year relationship with
Amana, Cooper had its showrooms in New Jersey, first in Newark
and then in Englewood Cliffs. App. 683-701. When Amana expanded
Cooper's New York sales territory in 1982, Cooper declined to
purchase Amana's Long Island facility, telling Amana that it was
a New Jersey-based firm and would not "split [the] operation."
App. 683. Even Amana conceded that it "knew that Cooper's
business was located in New Jersey." Appellant's Brief at 32.
0
Cooper argues that a reasonable jury could have found that
actual order taking occurred at the showroom. Since we hold that
a POB exists even without order taking, we need not discuss this
question.
27
Consequently, when the parties entered into the 1990 Agreement,
these facts were more than enough to create a reasonable
anticipation that Cooper would continue to have a POB in New
Jersey during the life of the new Agreement. See ISI, 614 A.2d
at 136-37 (finding that a 1984 agreement contemplated a New
Jersey POB because, in part, ISI had operated a marketing
facility in New Jersey since 1977); Liberty, 806 F. Supp. at 1008
(New Jersey location when first contracting with supplier is
enough to give rise to inference of anticipation of New Jersey
location).0
In sum, we hold that a reasonable jury could have
concluded (1) that Cooper and Amana had a "community of
interest," (2) that Amana granted Cooper a "license," and (3)
that Cooper established a New Jersey POB. Therefore, a
reasonable jury could have found that Cooper had a franchise
within the meaning of the Act. Accordingly, we affirm the
district court's denial of Amana's motion for judgment as a
matter of law on Cooper's NJFPA claim.
B. Jury Instructions
0
Amana also argues that the ISI court, by suggesting that ISI
could not sell its product without its facility, see ISI, 614
A.2d at 138, implicitly held that a facility cannot constitute a
POB unless the facility is necessary for the plaintiff's
business. A reasonable jury could have concluded, however, that
Cooper's showroom was necessary to its business since there was
evidence that the showroom was used for "important"
demonstrations, App. 1231, and for "vital" sales training. App.
834.
28
Amana contends that, even if it was not entitled to
judgment as a matter of law on Cooper's NJFPA claim, it was at
least entitled to a new trial due to the district court's
allegedly erroneous jury instructions. We review the district
court's instructions to determine "whether the charge, taken as a
whole and viewed in light of the evidence, fairly and adequately
submit[ted] the issues in the case to the jury." Limbach Co. v.
Sheet Metal Workers Intern. Ass'n, 949 F.2d 1241, 1259 n.15 (3d
Cir. 1991) (quoting Link v. Mercedes-Benz of North America, Inc.,
788 F.2d 918, 922 (3d Cir. 1986)). We grant a new trial "only if
the instruction was capable of confusing and thereby misleading
the jury." Link, 788 F.2d at 922. When reviewing instructions,
we consider "the totality of the instructions and not a
particular sentence or paragraph in isolation." In re Braen, 900
F.2d 621, 626 (3d Cir. 1990), cert. denied, 498 U.S. 1066 (1991).
Amana contends that the court gave improper instructions on each
of the three franchise requirements.
1. Community of interest.
The district court denied Amana's request for several
jury instructions regarding community of interest. First, it
refused to give the following instruction:
The fact that other brands or lines . . . may
or may not presently be available for
distribution by Cooper Distributing is not
relevant to the issue of whether or not a
community of interest existed between Amana
and Cooper Distributing in the marketing of
Amana products.
29
Ohio App. 351. Amana contends that Cooper was unable to find another
product line to distribute due to market changes and that these
changes could not convert Cooper's assets into franchise-specific
assets. Amana argues that the above instruction should have been
given to ensure that the jury understood this point.
Without deciding whether Amana's argument regarding the
effect of market changes under the NJFPA is correct, we hold that
the district court's detailed and accurate community-of-interest
charge (see App. 3901-05) taken as a whole was not capable of
confusing the jury. Not only did this instruction provide a
clear and correct general description of this concept and the
concept of franchise-specific assets, but the three specific
types of investments that the instruction mentioned -- goodwill,
product-specific knowledge, and inventory -- are not types of
investments that could easily become non-transferable due to
market changes. The court told the jury that franchise-specific
assets in this case might include:
[B]usiness goodwill developed by Cooper with
its customers associated with using Amana's
name or built up by significant advertising,
marketing, or promotional efforts with
respect to Amana home appliances and not able
to be transferred or utilized by Cooper
outside of the relationship with Amana; . . .
and any skill or knowledge Cooper gained in
the marketing of Amana's home appliances
which could not be used in selling other
brands of home appliances, even if lines of
appliances other than Amana were available to
Cooper.
App. 3905 (emphasis added). Thus, looking at the instructions as
a whole, we do not think that they were capable of leading the
30
jury into believing that assets rendered non-transferable merely
by market changes could contribute to a finding of franchise-
specificity.
Second, the district court denied Amana's request for
an instruction asking the jury to "consider whether the written
contracts between Amana and Cooper Distributing required Cooper
Distributing to direct all of its energy and resources to
developing demand for Amana products." App. 369 (emphasis
added). The district court did not err in refusing to give this
instruction because Cooper, in order to prove a community of
interest, was not required to show that it directed all of its
energy and resources to promoting the sale of Amana products. See
N.J.S.A. § 56:10-4 (minimum of 20% of gross sales must be from
franchisor); New Jersey American, 875 F.2d at 63 (noting that "a
firm may be considered a franchisee even if only 21% of its gross
sales are derived from the franchisor").0
2. License.
Amana argues that the district court erred in denying
three requested jury instructions on the subject of whether Amana
created a license. First, Amana contends that the court should
have given a charge stating that, in determining whether Cooper
had a "license" at the time of termination, the jury should not
0
The court also denied Amana's request for an instruction asking
the jury to consider whether "the dealers to whom Cooper
Distributing sold Amana products sold not only Amana but also
other brands of appliances." App. 376. We do not think that
this instruction had a bearing on whether Amana and Cooper had a
community of interests and we consequently hold that the district
court's failure to give this instruction was not erroneous.
31
consider certain practices that Cooper had already by this time
abandoned, such as its previous practices (see App. 749-50) of
performing in-home repair service on Amana appliances while
displaying the Amana logo on its truck. See App. 318. We
disagree. As previously noted, the New Jersey Supreme Court has
explained that "the term ``license' means that the alleged
franchisee must use the name of the franchisor ``in such a manner
as to create a reasonable belief on the part of the consuming
public that there is a connection between the . . . licensor and
licensee by which the licensor vouches, as it were, for the
activity of the licensee.'" ISI, 614 A.2d at 139 (citation
omitted). Cooper's past practices could be regarded as
contributing to the public's perception of the relationship
between Cooper and Amana. We therefore hold the district court's
denial of Amana's requested instruction was not erroneous.
Second, Amana contends that the district court erred in
refusing to give an instruction asking the jury to consider
whether Amana's products were "``off-the-shelf' type products that
[could] be purchased at regular business outlets (such as
appliance stores)." App. 322. We hold, however, that the
district court's "license" charge as a whole was not capable of
confusing the jury. This instruction was based squarely on ISI.
See App. 3899. Under the NJFPA, the distinction between "off-
the-shelf" products and others is not of such critical
significance that a specific instruction on this point was
essential.
32
Third, Amana argues that the district court erred in
denying its request for an instruction asking the jury to
consider whether the Agreement required Cooper to use its best
efforts to promote Amana's name, as opposed to Amana's products.
App. 329-330. As previously noted, however, we view the
distinction between the promotion of the Amana name and the
promotion of Amana products to be of little substance in the
context of this case. See supra page 22.
3. Place of Business.
The district court gave the following POB instruction:
A place of business is defined as "a fixed
geographical location at which the franchisee
displays for sale and sells the franchisor's
services."
. . .
To meet the place of business requirement, .
. . it is not necessary that the sale of
goods include only order taking at the
location. Using the location for display and
demonstration of the franchisor's goods to
prospective customers is sufficient.
App. 3899. Amana contends that this charge was inaccurate, but
we find Amana's argument to be without merit. As noted, we
predict that the New Jersey Supreme Court would hold that the
actual taking of orders is not necessary and that demonstrations
are sufficient in order to find a POB. See supra pages 24-26.
In summary, we hold that the trial court did not err in
denying Amana's motion for judgment as a matter of law or its
motion for a new trial on Cooper's NJFPA claim. We thus turn to
the question of damages.
33
C. NJFPA Damages
The jury awarded Cooper $4.375 million in damages under
the NJFPA. App. 4794. Amana requests a new trial on damages,
arguing that the district court erred in upholding the verdict.
Amana claims that the verdict was against the great weight of the
evidence because the jury based its damages award on the false
assumption that Cooper had a contractual right in the four-state
territory to be Amana's exclusive distributor to retail dealers.
App. 4954. Because we agree that Cooper had no such right and
because we additionally hold that the franchise was valued as of
the wrong date, we remand for a new trial on damages.
We are mindful that our scope of review of a damages
award is "exceedingly narrow." Williams v. Martin Marietta
Alumina, Inc., 817 F.2d 1030, 1038 (3d Cir. 1987) (quoting
Walters v. Mintec/International, 758 F.2d 73, 80 (3d Cir. 1985).
The district court's refusal to grant a new trial is reviewed for
abuse of discretion. See Frank Arnold Contractors, Inc. v.
Vilsmeier Auction Co., Inc., 806 F.2d 462, 465 (3d Cir. 1986). We
will reverse, however, when "the verdict is contrary to the great
weight of the evidence, thus making a new trial necessary to
prevent a miscarriage of justice." Roebuck v. Drexel, 852 F.2d
715, 736 (3d Cir. 1988).
In the current case, Cooper's valuation expert, Melvin
Konner, in calculating the value of the Cooper franchise, assumed
that Cooper had an exclusive right to sell to the retail dealers
in its four-state territory and "that Amana had no right to sell
34
[to the dealers] direct[ly.]" App. 1841. Furthermore, Konner
explained that his calculation of the value of the Cooper
franchise would have been "considerably less" if "Amana did have
the right to sell directly" to the dealers. App. 18. The jury's
award appears to have been based on Konner's estimate. As will
be discussed below, however, see infra p. 36-42, Amana did not
grant Cooper the exclusive right to sell to the retail dealers,
and therefore Konner's assumption was incorrect. Consequently,
we hold that the jury's verdict was against the great weight of
the evidence, and we therefore remand for a new trial on NJFPA
damages.
We also find that the Cooper franchise was valued as of
the wrong date. The district court instructed the jury to value
the franchise as of November 5, 1991, the date that Amana
attempted to terminate the franchise, App. 2917, and Konner
likewise calculated Cooper's value as that date. App. 1780.
However, as a result of the preliminary injunction entered by the
district court, Cooper continued to operate its franchise until
the date of judgment, March 8, 1994, which was also the date on
which the district court dissolved the preliminary injunction.
App. 5000-02. Although Amana unquestionably attempted to
terminate the Cooper franchise on November 5, 1991, the franchise
was not effectively terminated until the dissolution of the
preliminary injunction on March 8, 1994, since Cooper continued
to operate and receive profits from the franchise until that
latter date. We therefore hold that the franchise should have
35
been valued as of that date, when Cooper actually stopped running
the franchise.
Valuing the franchise as of the earlier date would
bestow a double recovery on Cooper. When franchises are valued,
the "price should be approximately equal to the present value of
all income that can be derived far into the future from the
business." Johnson v. Oroweat, 785 F.2d 503, 507 (4th Cir.
1986). This incorporation of future earnings into the current
value of a business explains "why courts allow a plaintiff to
recover either the present value of lost future earnings or the
present market value of the lost business, but not both." Id. at
508; see also Arnott v. American Oil Co., 609 F.2d 873, 886 (8th
Cir. 1979) ("[I]t is improper to permit a plaintiff . . . to
recover both the value of the business as a going concern . . .
and future profits of that business . . . . Future profit
potential is taken into consideration in valuing the business as
a going concern."), cert. denied, 446 U.S. 981 (1980).
Consequently, valuing the Cooper franchise as of November 5,
1991, would give rise to a double recovery because Cooper would
receive both (1) the value of the franchise as of the earlier
date -- (which would include the present value of the future
earnings from that date to the date of judgment)0 and (2) the
actual profits derived from the franchise between the date of the
attempted termination and the date of judgment. To avoid this
0
See App. 1799 (valuation expert Konner predicting "how [the]
business [was] going to do" after 1991).
36
double recovery, we conclude that the proper date of valuation in
this case is March 8, 1994.0
III. CONTRACT CLAIM
We now turn to Cooper's breach of contract claim. In
the early summer of 1991, a few months before the attempted
termination, Amana began selling products directly to P.C.
Richard, Cooper's largest dealer, App. 2309-13,0 and other local
dealers. Cooper asserted that the Agreement prohibited Amana
from selling directly to such dealers in Cooper's territory and
that therefore Amana was in breach. The district court, after
concluding that the Agreement was ambiguous as to Amana's right
to make direct sales in Cooper's territory, App. 170-71,
submitted the contract interpretation issue to the jury. The
court instructed the jury to consider course of dealing and
course of performance evidence in determining whether Amana had
the right to make such sales. App. 3909-10. Apparently relying
0
The New Jersey Supreme Court's decision in Westfield Centre
Services, Inc. v. Cities Service Oil Co., 432 A.2d 48 (N.J.
1981), does not mandate a contrary result. In its opinion in
that case, the court observed that where a franchisor violates
the NJFPA but is motivated by good faith business reasons, the
franchisee's damages "should be measured . . . in terms of the
actual or reasonable value of the franchisee's business when the
franchisor cuts off the franchise." 432 A.2d at 55. In the
current case, Cooper's franchise should be viewed as having been
effectively "cut[] off" when the preliminary injunction was
vacated.
0
P.C. Richard, a local dealer, was an annual purchaser of $6
million of Amana products, representing one-third of Cooper's
total Amana business and 60% of Cooper's New York Amana sales.
App. 910, 1014-16, 3955.
37
on such evidence,0 the jury concluded that Amana did not reserve
the right to sell to dealers in Cooper's region and awarded
Cooper $2 million for Amana's breach. Amana maintains that the
district court committed reversible error in concluding that the
contract was ambiguous and in submitting the question of contract
interpretation to the jury. We agree.
The Agreement provides that any disputes under the
Agreement are "subject to [the] laws of the State of Iowa." App.
3982. Under Iowa law, the test for ambiguity is an objective
one: "whether the language is fairly susceptible to two or more
different meanings." PMX Industries, Inc. v. LEP Profit Intern.,
31 F.3d 701, 703 (8th Cir. 1994) (citing Iowa Fuel & Minerals,
Inc. v. Iowa State Bd. of Regents, 471 N.W.2d 859, 862-63 (Iowa
1991)); see also Taylor v. Continental, 933 F.2d 1227, 1232 (3d
Cir. 1991) ("A term is ambiguous if it is susceptible to
reasonable interpretations."). Furthermore, where a "written
contract is unambiguous, Iowa law does not allow consideration of
extrinsic evidence." PMX Industries, Inc. v. LEP Profit
International, 31 F.3d 701, 703 (8th Cir. 1994); see also Iowa
Fuel, 471 F.2d at 862 (parties' intent determined by the words of
the contract); Anderson v. Aspelmeier, Fisch, Power, Warner, &
Engberg, 461 N.W.2d 598, 600 (Iowa 1990) (extrinsic evidence may
0
See, e.g., App. 988 (testimony from Cooper's president and
general manager, William Cooper, that, except for Amana's sales
to the national accounts, Cooper had been the exclusive dealer
for 30 years); App. 994 (announcement from Amana to the retail
dealers in Cooper's area that Cooper was "the exclusive
distributor of Amana's domestic appliances" in that region); App.
3379-80 (testimony that Amana repeatedly told Cooper that Cooper
had an exclusive sales territory).
38
not be used to modify, enlarge, or curtail the contract terms).0
While extrinsic evidence, such as the course of performance
evidence submitted to the jury in this case, may be admissible to
"supplement[] or explain[]" the terms of the agreement, it cannot
be used to contradict unambiguous terms. Ralph's Distributing
Co. v. AMF, Inc., 667 F.2d 670, 673 (8th Cir. 1981). The
decision whether a contract is ambiguous is one for the court to
decide as a matter of law, see Boge v. State of Iowa, 309 N.W.2d
8, 430 (Iowa 1981), and therefore our review is plenary.
We hold that the language of the Agreement between
Amana and Cooper unambiguously provided for a non-exclusive
distributorship arrangement and therefore that the district court
erred in submitting to the jury the question of whether Amana
reserved the right to sell directly to dealers in Cooper's
territory. One provision of the Agreement states:
0
The Iowa Supreme Court has not addressed the question whether
the Uniform Commercial Code (UCC) applies to distributorship
agreements under Iowa law. However, In Corenswet, Inc. v. Amana
Refrigeration, Inc., 594 F.2d 129 (5th Cir.), cert. denied, 444
U.S. 938 (1979), the Fifth Circuit applied the UCC to a
distributorship under Iowa law, explaining:
Although most distributorship agreements . .
. are more than sales contracts, the courts
have not hesitated to apply the Uniform
Commercial Code to cases involving such
agreements.
Id. at 132 (citations omitted); see also Ralph's Distributing Co.
v. AMF, Inc., 667 F.2d 670, 673 n.6 (8th Cir. 1981) (following
Corenswet).
Assuming that the Iowa courts would apply the Iowa version of
the UCC in this case, the result would not be affected. Under
Iowa Code § 554.2202, the express terms of the Agreement could
not be contradicted by contrary course-of-dealing evidence.
39
[T]he Distributor [Cooper] shall have the
non-exclusive right to purchase from Amana
for resale . . . .
App. 3979 (emphasis added).
Another even more specific provision states:
Amana reserves the right to make sales
directly or through other channels of
distribution including, but not limited to,
sales: (a) to any national, state or local
government, or any agency or subdivision
thereof; (b) for export; (c) to another
manufacturer, (d) under trademarks other than
Amana such as products manufactured under
private label, (e) for commercial use; (f) to
national accounts; (g) to general
contractors, sub-contractors, builder
distributor/dealers or developers of business
or home building projects; (h) to leasing
and/or rental accounts. Any sales under this
provision may be made by Amana without
notice, compensation or other obligation of
any kind to Distributor.
App. 3981 (emphasis added).
In arguing that this provision is ambiguous, Cooper
relies on the fact that sales by Amana to local retailers, such
as P.C. Richard, are not specifically mentioned in the list
contained in the provision. But since this list is prefaced by
the phrase "including but not limited to," this argument is
unconvincing. The list merely gives examples of entities with
whom Amana reserved "the right to make sales directly." By using
the phrase "including, but not limited to," the parties
unambiguously stated that the list was not exhaustive. See
Foods, Inc. v. Iowa Civil Rights Comm'n, 318 N.W.2d 162, 171
(Iowa 1982) (noting that the "including, but not limited to"
language created a considerably discretionary standard); In re
40
Forfeiture of $5,264, 439 N.W.2d 246, 251 n.7 (Mich. 1989)
(inferring a broad construction from use of the "including, but
not limited to" language); Jackson v. O'Leary, 689 F. Supp. 846,
849 (N.D. Ill. 1988) (noting that the phrase "including, but not
limited to" is "the classic language of totally unrestricted (and
hence totally discretionary) standards").
Cooper's contention that our interpretation of the
contract noted above should be governed by the rule of ejusdem
generis is unpersuasive. Under this rule of construction,
general words near a specific list are "not to be construed to
their widest extent, but are to be held as applying only to . . .
things of the same general kind . . . as those specifically
[listed]." Black's Law Dictionary, 464 (5th ed. 1979); see also
In re Syverson's Estate, 32 N.W.2d 799, 804 (Iowa 1948); Attorney
General v. Blue Cross & Blue Shield of Michigan, 4 N.W.2d 54, 58
(Mich. Ct. App. 1988). Assuming that sales to retail dealers are
not of the same general kind as the other transactions listed in
the Agreement, Cooper contends that we should infer that Amana
cannot make such direct sales. But the rule of ejusdem generis
applies only if the provision in question does not express a
contrary intent. See In re Syverson's Estate, 32 N.W.2d at 804;
Blue Cross, 4 N.W.2d at 58. Thus, since the phrase "including,
but not limited to" plainly expresses a contrary intent, the
doctrine of ejusdem generis is inapplicable. See In re
Forfeiture of $5,264, 439 N.W.2d at 251 n.7 (noting that the rule
of ejusdem generis did not apply because the proviso contained
the "including, but not limited to" language); Ramirez, Leal &
41
Co. v. City Demonstration Agency, 549 F.2d 87, 104 (9th Cir.
1976) (explaining that "including, but not limited to" language
is "often used to mitigate" the rule of ejusdem generis); Blue
Cross, 4 N.W.2d at 58.
In an effort to support its argument, Cooper cites
other cases involving contractual language which, according to
Cooper, withheld exclusive distributorship rights in language
that was even clearer than that in the Agreement at issue here.
This argument, however, misses the mark. The question is not
whether the Agreement could have been even more emphatic, but
rather whether the language of the Agreement is susceptible to
more than one reasonable interpretation. Since we hold that the
language is unambiguous, it is irrelevant whether even more
forceful language might have been possible. See PMX, 31 F.3d at
703. Accordingly, we hold that the Agreement unambiguously
permitted Amana to make any direct sales it wished and that the
introduction of contradictory extrinsic evidence in this regard
was impermissible.0 We therefore reverse the judgment entered in
0
Ralph's Distributing Co. v. AMF, Inc., 667 F.2d 670 (8th Cir.
1981), is not to the contrary. There, Ralph's Distributing
Company, a wholesale distributor of snowmobiles, sued AMF, a
snowmobile manufacturer that had entered into a franchise
agreement with Ralph's. Pursuant to the agreement, Ralph's was
to buy the snowmobiles directly from AMF and then resell them to
retail dealers in its designated territory. When AMF began to
sell directly to the retail dealers in Ralph's territory, Ralph's
sued for breach of contract, alleging that AMF's direct sales in
Ralph's territory violated Ralph's contractual right to be the
exclusive distributor. Interpreting Iowa law, the Eighth Circuit
considered extrinsic evidence in interpreting the contract.
Ralph's is distinguishable from the current case, however,
because "the contracts designating Ralph's sales area [were]
silent as to whether or not it would be the exclusive [AMF
42
favor of Cooper on its breach of contract claim and remand for
the entry of judgment in favor of Amana on this claim.0
IV. TORTIOUS INTERFERENCE WITH PROSPECTIVE
BUSINESS ADVANTAGE
The jury found for Cooper on its claim for tortious
interference with prospective business advantage, App. 4795-96,
but the jury did not award any actual damages on this claim. Id.
The jury did, however, award $3 million in punitive damages. Id.
As the district court explained to the jury, Cooper's tortious
interference claim was the only claim on which punitive damages
were available. App. 3921.
Under New Jersey law, the elements of a claim for
tortious interference with prospective business advantage are as
follows: 1) a prospective economic relationship from which the
plaintiff has a reasonable expectation of gain; 2) intentional
and unjustifiable interference with that expectation, and 3) a
causative relationship between the interference and the loss of
the prospective gain. See Printing Mart-Morristown v. Sharp
Electronics Corp., 563 A.2d 31, 37 (N.J. 1989).
snowmobile] distributor in that territory." Ralph's, 667 F.2d at
673.
0
Amana argued that the judgment in favor of Cooper on the breach
of contract claim should be reversed in whole or in part, for two
additional reasons: (1) because the district court allegedly
gave incorrect jury instructions and (2) because Cooper's
contract damages were duplicative of its recovery under the
NJFPA. Because we hold, for the reasons explained above, that
Amana is entitled to judgment on Cooper's breach of contract
claim, we need not reach either of these arguments.
43
Cooper based its tortious interference claim on two
independent sets of alleged facts: (1) Amana's sale of products
directly to P.C. Richard and (2) other conduct in which Amana
engaged after the district court preliminarily enjoined Amana
from terminating the Cooper franchise.0 App. 3912-13. The jury
returned a verdict for Cooper on both bases,0 Ohio App. 4795-96, and
the district court entered judgment in accordance with the
verdict. App. 5703-11.
Assuming arguendo that there was legally sufficient
evidence to support the jury's finding of tortious interference,
Amana contends that the award of $3 million in punitive damages
must be reversed because the jury, by awarding $0 in actual
damages, found that Cooper suffered no injury. We agree with
Amana's argument.
Under New Jersey law, a plaintiff must suffer some
injury in order to recover punitive damages. See Nappe v.
Anschelewitz, Barr, Ansell & Bonello, 477 A.2d 1224, 1232 (N.J.
1984) ("[P]unitive damages may be assessed . . . where some
injury, loss, or detriment to the plaintiff has occurred.")
(emphasis in original); Lightning Lube, Inc. v. Witco Corp., 4
F.3d 1153, 1195 (3d Cir. 1993). Despite the jury's finding of $0
0
For example, Cooper offered evidence that was intended to prove
that, after the preliminary injunction, Amana intentionally
delayed approval of an air conditioner sales program between
Cooper and one of its largest dealers, Trader Horn. App. 1047-
61; see also App. 1067-73 (evidence that Amana dropped Cooper
from its mailing list and thus left Cooper unaware of discounts
and model changes).
0
In light of our prior discussion concerning Cooper's breach of
contract claim, the punitive damage claim could not be sustained
based on the first theory set out above.
44
in actual damages, Cooper makes two arguments that it did suffer
injury and that punitive damages were therefore permitted. First,
Cooper claims that the finding of harm necessary to an award of
punitive damages need not be monetarily measurable but can be
intangible or unquantifiable. Second, it claims that the jury
"molded" the breach of contract verdict with the tortious
interference verdict and that we should infer that the jury did
award some actual damages for Amana's tortious interference.
As for Cooper's argument that it suffered intangible
injury and was therefore entitled to a punitive award, the New
Jersey Supreme Court has explained that a plaintiff need not show
injury which gives rise to compensatory damages in order to
receive punitive damages. See Nappe, 477 A.2d at 1231-32. The
question we must answer is whether Cooper may recover punitive
damages in the absence of an award of even nominal damages.
In Lightning Lube, we considered whether Lightning
Lube, a lube oil dealer, could recover punitive damages from
Witco, an oil equipment supplier, on Lightning Lube's fraud and
misrepresentation claim where the jury found that the plaintiff
had sustained no damages. We held that in light of the jury's
refusal to award nominal damages to the plaintiff, we could infer
that the plaintiff did not suffer sufficient injury to warrant an
award of punitive damages. We explained:
Inasmuch as the jury did not find sufficient
injury to award nominal damages on this
claim, the . . . fraud cannot sustain an
award of punitive damages.
45
Lightning Lube, 4 F.3d at 1195. Relying on Lightning Lube, Amana
contends that because the jury did not find sufficient injury to
award even nominal damages to Cooper, the tortious interference
claim cannot sustain a punitive award.
The district court rejected Amana's argument by seeking
to distinguish Lightning Lube. App. 5708. Whereas neither party
in the current case requested a nominal damages instruction, the
jury charge in Lightning Lube contained the following
instruction:
If you find that the defendant has violated
the legal rights of the plaintiff in
accordance with the law upon which I have
instructed you, and if you find that the
plaintiff has proven it has sustained damages
but they are not computable, you may enter an
award of nominal damages.
App. 5708 (district court citing Lightning Lube jury
instructions). Based upon this instruction, it was clear that
"the jury knew to award nominal damages expressly if it desired
to do so," Lightning Lube, 4 F.3d at 1195, and therefore the
jury's failure to award nominal damages in that case implied that
the jury did not find any injury. In the current case, the
district court noted, no instructions on nominal damages were
sought or given, and the district court therefore opined that the
jury's finding of $0 in damages on Cooper's tortious interference
claim could "not be read to imply a finding that Cooper had
suffered no damages as result of Amana's tortious interference."
App. 5710. In addition, the district court stated that it could
be inferred that the jury found that Cooper suffered actual harm
46
because the jury awarded punitive damages after being instructed
that such damages could not be awarded unless "some harm to the
plaintiff has occurred, even if intangible or unquantifiable."
App. 3922. Therefore, the district court held that the jury
found that Cooper did suffer sufficient injury to warrant
punitive damages.
We find the district court's reasoning unconvincing.
Much like the jury in this case, the Lightning Lube jury was
instructed that it could award punitive damages only if the
"defendant ha[d] committed fraud or misrepresentation which had
caused plaintiff damage." App. 5721 (emphasis added). Yet
despite this instruction, we held that the jury's punitive
damages award was improper because the jury there, as here,
awarded $0 in actual damages. Thus, the mere fact that the
punitive damages instructions in this case required a finding of
actual harm is insufficient to sustain the punitive damages
award.
Moreover, we do not think that the fact that "the
Lightning Lube jury was specifically made aware of the
availability of nominal damages," App. 5708, can justify a
contrary result. We decline to accept Cooper's invitation to
place the burden on the defendant to request a nominal damages
instruction. Cooper was the party seeking a finding of actual
injury and, as such, bore the responsibility of requesting a
nominal damages instruction if it wanted the jury to consider
that option. Of course, Cooper may well have decided for
tactical reasons that it did not want the jury to consider that
47
option. But whether Cooper failed to request an instruction on
nominal damages by choice or inadvertence, it should bear the
consequences. Because Cooper did not request such an
instruction, it cannot now contend that we should infer a finding
of nominal damages. See Walker v. Anderson Electrical
Connectors, 944 F.2d 841, 844-45 (11th Cir. 1991) (holding that
plaintiff was not entitled to a presumption of nominal damages
when she had failed to request them), cert. denied, 113 S. Ct.
1043 (1993);0 Sims v. Mulcahy, 902 F.2d 524, 535 (7th Cir.),
cert. denied, 498 U.S. 897 (1990).0
We next address Cooper's contention that the jury
"molded" the $0 tortious interference verdict with the $2 million
breach of contract verdict and in fact awarded substantial
compensatory damages on the tortious interference claim. Cooper
maintains that because there was evidence in the record that
Cooper lost $1,959,000 as a result of Amana's direct sales to
0
The Eleventh Circuit in Walker suggested that the reason that it
placed the burden of such a request on the plaintiff was because
she had something to gain by its absence. The court, quoting the
defendant's brief, noted that:
[i]f there had been an instruction . . . on
nominal damages, the jury might have given
it, and that was a risk to be avoided by the
plaintiff since she was after substantial
money.
Walker, 944 F.2d at 845 n.7.
0
Cooper's reliance on Singer Shop-Rite, Inc. v. Rangel, 416 A.2d
965, 968 (N.J. Super. Ct. App. Div.), certif. denied, 425 A.2d
299 (N.J. 1980), is misplaced since Rangel explained that
punitive damages will be upheld "where actual damage has been
shown to accrue from the tortious act."
48
P.C. Richard, App. 4607, and because there was evidence in the
record that Cooper lost $41,000 as a result of Amana's allegedly
tortious post-injunction conduct, App. 4611, we should infer that
the jury's $2 million breach of contract award was really a
"molding" of its breach of contract verdict and its tortious
interference verdict.
In support of its argument, Cooper relies on Universal
Computers (Systems) Ltd. v. Datamedia Corp., 653 F. Supp. 518
(D.N.J.), aff'd, 838 F.2d 1208 (3d Cir. 1988) (no published
opinion). In Datamedia, the jury found for the plaintiff on
several theories, one of which, fraud, could have supported an
award of punitive damages. The jury, however, did not fill in
the damages line on its special verdict form for any of the
theories except the first one and instead left the line next to
all the remaining theories, including fraud, blank. See id. at
532-34. Concluding that the jury had misunderstood the verdict
form and had aggregated all the damages on a single line, the
district court held that in actuality the jury had awarded actual
damages for fraud and that the award of punitive damages could be
upheld. See id. at 530. Of course, Datamedia is not binding on
us and, even if it were, it would be inapplicable here. In this
case, the jury did not leave a blank next to the line for
tortious interference; instead the jury wrote "$0." App. 4795-
96. In the face of such an express finding of $0 damages, we
refuse to infer that the jury "molded" its verdict and in fact
awarded actual damages for tortious interference.
49
This result is buttressed by the fact that the sum
total of Cooper's alleged losses from its contract claim combined
with Cooper's alleged losses from its tortious interference claim
do not really equal $2 million, as Cooper erroneously suggests.
Although there was evidence in the record that Cooper lost
$1,959,000 as a result of Amana's direct sales to just P.C.
Richard, App. 4607, there was also evidence in the record that
Cooper lost $2,001,000 as a result of Amana's direct sales to all
of Cooper's local retail dealers (i.e., P.C. Richard plus the
other local retailers). App. 4606. Since the breach of contract
verdict question on the special verdict form asked the jury to
consider Amana's direct sales "to P.C. Richard and other
dealers," App. 4794 (emphasis added), the facts do not support
Cooper's inventive theory that the jury aggregated Cooper's
claimed breach of contract damages with Cooper's claimed tortious
interference damages. Accordingly, we hold that, pursuant to the
jury's verdict, Cooper suffered no actual harm as a result of the
tortious interference claim, and we therefore reverse the
district court's entry of the $3 million judgment for punitive
damages in favor of Cooper and remand for the entry of a judgment
of $0.0
V. PREJUDGMENT INTEREST
0
Consequently, we need not address Amana's two alternative
arguments (1) that the punitive damages did not bear a reasonable
relationship to the actual damages and (2) that Cooper failed to
prove that Amana acted with the malice necessary to warrant
punitive damages.
50
Last, we turn to Cooper's cross-appeal and its
contention that it was entitled to prejudgment interest on its
NJFPA award. Applying New Jersey law, the district court denied
prejudgment interest because "the injunction barring Amana from
terminating Cooper precludes Cooper from convincingly arguing
that it was denied the use of the value of its own business."
App. 5739 n.2. We agree with this holding,0 and we therefore
affirm.
On appeal, Cooper argues that it is entitled to
prejudgment interest on its NJFPA claim no matter whether that
claim sounds in contract or tort. In our view, however, Cooper
is not entitled to prejudgment interest in either event. If the
NJFPA claim is analogized to a contract claim under New Jersey
law, the award of prejudgment interest for claims arising in
contract is subject to the discretion of the trial court. See
Meshinsky v. Nichols Yacht Sales, Inc., 541 A.2d 1063, 1070 (N.J.
1988). Traditionally, prejudgment interest was awarded in
contract cases only on liquidated damages. See George H. Swatek,
Inc. v. North Star Graphics, Inc., 587 A.2d 629, 632 (N.J. Super.
Ct. App. Div. 1991) (noting that historically, prejudgment
interest was not awarded "where a . . . substantial controversy
0
Cooper contends on appeal that, pursuant to the Agreement, Iowa
law should govern. However, since Cooper argued to the district
court that "New Jersey's approach to prejudgment interest governs
the franchise claim," App. 5193, we hold that Cooper failed to
raise the argument that Iowa law should govern the prejudgment
interest claim to the district court and that Cooper therefore
cannot raise the argument for the first time on appeal. See
Harris v. City of Philadelphia, 35 F.3d 840, 845 (3d Cir. 1994)
(declining to address a claim raised for the first time on
appeal).
51
exist[ed] as to the amount due under a contract"). The rationale
was that "the person who is liable for the debt does not know the
sum he owes and cannot be in default until the amount he owes is
determined by judgment." Preston v. Claridge Hotel & Casino
Ltd., 555 A.2d 12, 16 (N.J. Super. Ct. App. Div. 1989).
However, "the rule that limited prejudgment interest awards to
cases where damages were liquidated or clearly ascertainable in
advance has been significantly eroded." Meshinsky v. Nichols
Yacht Sales, Inc., 541 A.2d 1063, 1070 (N.J. 1988); see also
Swatek, 587 A.2d at 633 (prejudgment interest can be awarded
"whether either liquidated or unliquidated damages are
recovered"). Today, the purpose of an award of prejudgment
interest is "to indemnify the claimant for the loss of what the
moneys due him would presumably have earned if the payment had
not been delayed." Ellmex Construction Co., Inc. v. Republic
Insurance Co., 494 A.2d 339, 349 (N.J. Super. Ct. App. Div.
1985), certif. denied, 511 A.2d 639 (N.J. 1986). As the New
Jersey Supreme Court explained, "[t]he basic consideration is
that the defendant has had the use, and the plaintiff has not, of
the amount in question." Rova Farms Resort, Inc. v. Investors
Insurance Co. of America, 323 A.2d 495, 512 (N.J. 1974).
In the current case, at no time prior to the judgment
did Amana have the use of Cooper's property. We explained above
that, due to the operation of the preliminary injunction,
Cooper's franchise was not effectively terminated until the date
of the court's dissolution of the preliminary injunction when the
judgment was entered, see supra p. 35, and that, for practical
52
purposes, Cooper had the use of its franchise until that date.
Consequently, at no time prior to judgment did Amana have the use
of something of value owned by Cooper, and we therefore hold that
the district court acted within its discretion by rejecting
Cooper's request for NJFPA prejudgment interest predicated on a
contract-based theory.
Cooper makes the alternative argument that its NJFPA
claim should be considered to be in tort and, as such, should
give rise to prejudgment interest pursuant to New Jersey Court
Rule 4:-11(b), which provides for prejudgment interest on tort
claims. We hold that the fact that Cooper was not denied the use
of its property until judgment precludes Cooper from receiving
prejudgment interest even if Cooper's NJFPA claim is viewed as
sounding in tort. Since Cooper's franchise existed until the
date of judgment, we affirm the district court's holding that
Cooper was not entitled to prejudgment interest.0
VI. CONCLUSION
For the reasons explained above, we affirm the district
court's denial of Amana's motion for a judgment as a matter of
law and its motion for a new trial on the NJFPA claim. We
reverse the district court's denial of a new trial on NJFPA
0
Alternatively, Cooper claims that the district court erred by
failing to award Cooper prejudgment interest in light of Amana's
alleged aggravated misconduct. See W.A. Wright, Inc. v. KDI
Sylvan Pools, Inc., 746 F.2d 215, 219 (3d Cir. 1984) (egregious
conduct warranted prejudgment interest). Again, however, we
decline to award prejudgment interest where the plaintiff was not
deprived of the use of his property until judgment.
53
damages and remand for a new trial on that issue consistent with
this opinion. We reverse the judgment in favor of Cooper on its
breach of contract claim and remand for the entry of judgment for
Amana on that claim. We reverse the award of $3 million in
punitive damages to Cooper on its tortious interference claim and
remand for the entry of a judgment for $0. We affirm the
district court's denial of Cooper's motion for prejudgment
interest. Each side will bear its own costs.0
0
While a sharing of costs often follows a decision in which each
side has prevailed on one or more issues, in this case we take
the occasion to note that even if Cooper had prevailed, we might
not have awarded it costs because of the excessiveness of the
footnotes in its otherwise helpful and persuasive brief. This
court's local rules explicitly state that "excessive footnotes in
briefs are discouraged." See LAR 32.2(a). The effect was not
only to make the brief more difficult to read, but it meant that
many pages contained more than the 27 lines of double-space text
permissible under LAR 32.1(c).
54
55
Cooper Distributing Company v. Amana Refrigeration, Inc.
Nos. 94-5569 and 94-5570
SLOVITER, Chief Judge, concurring and dissenting.
I am happy to join the majority's careful and persuasive opinion in all r
except one: although I believe it is a close question, I cannot agree that the
Distributor Agreement unambiguously permitted Amana to sell directly to all dealers
Cooper's territory. I believe that the district court did not err in determining t
distributorship agreement between Amana and Cooper was ambiguous and in submitting
issue to the jury. Moreover, I believe that once the issue was properly before the
there was adequate evidence from which the jury could have found that Amana's decis
sell directly to P.C. Richard & Son, Cooper's largest account, and to other local d
was a breach of contract.
The majority bases its decision that the agreement unambiguously reserved
Amana the right to sell to retail dealers such as P.C. Richard on (1) the designati
Cooper's "right to purchase from Amana for resale" as "non-exclusive" and (2) the p
of Amana's reservation of "the right to make sales directly or through other channe
distribution" to listed categories with the words "including, but not limited to, s
to those categories. Admittedly, the contract reflects an understanding that Coope
right to sell was not exclusive, even within its territory, and that the listing of
certain categories to which Amana could sell was not exhaustive, but it does not
56
necessarily follow that Amana unambiguously reserved the right to sell directly to
customer in Cooper's territory.
The first provision on which the majority relies states that the "Distrib
shall have the non-exclusive right to purchase from Amana for resale." App. 3979
(emphasis added). Patently, this does not apply to Amana itself. The "purchase for
resale" presumably applies to companies such as Cooper, which sell to retailers, an
provision's applicability to P.C. Richard, which sells only to consumers, is unclea
Thus, there is some ambiguity whether or why this provision has any application to
right to sell directly to a local retailer.
The other provision on which the majority relies is the reservation claus
Here Amana did indeed reserve the right to make sales "directly or through other ch
of distribution" and prefaced the list of the other "channels of distribution"
with the words "including, but not limited to." App. 3981. I find this more ambig
than does the majority because none of the enumerated categories resembles a local
account, such as P.C. Richard, and Cooper was unlikely to be in a position to sell
effectively to any of the enumerated accounts. The point is not that we could say
certainty that Amana did not reserve the right to make direct sales to retailers, b
merely that the issue is not clear as a matter of law. This is markedly different
the contract that was at issue in Manchester Equipment Co. v. Panasonic Indus. Co.,
N.Y.S.2d 532, 533 (N.Y. Sup. Ct. App. Div.), appeal dismissed, 531 N.E.2d 299 (N.Y.
appeal denied, 534 N.E.2d 329 (N.Y. 1988), where Panasonic had expressly reserved "
unrestricted right to solicit and make direct sales of the Products to anyone, anyw
(emphasis added).
57
Moreover, under Iowa law, the language reserving sales to Amana should no
read in isolation. The ambiguity vel non of contractual language must be determine
looking at the contract as a whole. As the Iowa Supreme Court said in Freese v. To
Alburnett, 125 N.W.2d 790, 792 (Iowa 1964), "[A]mbiguity appears when a genuine dou
appears as to the meaning of a contract, and the instrument must be construed as an
entirety." Moreover, "a contract will not be interpreted giving discretion to one p
a manner which would put one party at the mercy of another, unless the contract cle
requires such an interpretation." Iowa Fuel & Minerals, Inc. v. Iowa State Bd. of
Regents, 471 N.W.2d 859, 863 (Iowa 1991).
In Freese, the issue was whether a contractor who had drilled a well for
under a contract requiring him to "[f]urnish and install all equipment for test pum
for a "[l]ump sum [of] $500.00" had an obligation to conduct a second test pumping
the well caved in. 125 N.W.2d at 792. The town contended that the contract unambi
required the contractor "to test pump [the] well as many times as was necessary to
the Town's engineer, for the sum of $500.00, in order to complete his basic contrac
Id. The trial court, after considering evidence presented, refused to accept this
contention and found the contract ambiguous, a somewhat different approach to ambig
than followed by those courts which look only to the contract. The Supreme Court o
stated:
Considering the evidence that this is a time-consuming and costly
operation and that the contractor was required to follow implicitly
the directions of the engineer, the trial court found considerable
doubt as to the meaning of this contract provision. We must agree.
58
Id. The Court then stated, "It would be most unfair and inequitable to hold [the
contract] required the contractor to perform this expensive task as often as requir
the engineer." Id. at 793.
Thus, we must look in the first instance at the entire contract to ascert
whether it is consistent with all of its provisions to construe the provisions reli
by Amana as unambiguously giving it the right to sell directly to Cooper's largest
customer, one who accounted for one-third of its total Amana sales, and 60% of its
York Amana sales. In making this inquiry, I do not suggest that a court should int
terms into the contract that it deems fair and equitable but merely that the court
decide from an objective standard whether the provision on which the party relies i
unambiguous when read in context of the entire contract.
In this case, we should look at whether the obligations that the Distribu
Agreement imposes on Cooper are consistent with a reservation to Amana of the right
sell directly to retailers in Cooper's territory. Like the Iowa Supreme Court in F
I have "considerable doubt" whether they are, especially considering that 78% to 10
Cooper's business was derived from the sale of Amana products. For example, Cooper
required to use its best efforts to promote sales and "[t]o accept a minimum quota
determined by Amana based on sales potential in the territory." App. 3979. Such a
quota would be meaningless if Amana could undersell Cooper at will by selling direc
Cooper's customers. In addition, the Agreement obliged Cooper to "purchase and mai
an appropriate inventory of all Products in accordance with Amana's written program
policies." Id. Such a provision had the potential of stranding Cooper with useles
inventory if Amana could sell directly to the retailers.
59
Reading the contract as a whole, I believe it is ambiguous as to whether
had the right to sell directly to retail dealers in Cooper's territory, and that th
district court did not err in submitting the question of contract interpretation to
jury. Therefore, I respectfully dissent in that respect.
60