Erdmann v. Preferred Research, Inc. of Georgia

852 F.2d 788, 1988 U.S. App. LEXIS 10087
CourtCourt of Appeals for the Fourth Circuit
DecidedJuly 29, 1988
DocketNos. 87-2618, 87-2622 and 87-2623
StatusPublished
Cited by11 cases

This text of 852 F.2d 788 (Erdmann v. Preferred Research, Inc. of Georgia) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fourth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Erdmann v. Preferred Research, Inc. of Georgia, 852 F.2d 788, 1988 U.S. App. LEXIS 10087 (4th Cir. 1988).

Opinion

MERHIGE, Senior District Judge:

In the case below, the jury awarded plaintiff damages for breach of licensing contract and tortious interference with business relationships. The district court entered judgment not withstanding the verdict for defendant on the tortious interference claim. Both parties have appealed. For the reasons set forth below, we affirm.

Background

Appellant and Cross-Appellee, Preferred Research, Inc. (Preferred) provides title insurance, real estate appraisals and loan closings to lenders in the business of making mortgage loans in six states, including Virginia. Its primary method of operation is to license others who operate title insurance business under the name of Preferred Research.

Appellee and Cross-Appellant, Craig C. Erdmann (Erdmann), a Virginia lawyer, entered into a license agreement with Preferred under date of December 11, 1985. Under this agreement, Erdmann operated under the name Preferred Research of Central Virginia and was authorized to issue title insurance policies as an agent of Preferred. Erdmann was granted, an exclusive right to operate in the Richmond, Virginia area for a period of ten years, with the understanding that if the License Agreement was terminated, he would not compete in any capacity with Preferred for a period of one year.

In July of 1986, Preferred sought a modification of the License Agreement with Erdmann by deleting the words “in any capacity” from the non-competition clause.

Erdmann did not sign the suggested modification, although he and the president of Preferred discussed it a number of times. Preferred contends that Erdmann insisted on a reduction of Preferred’s appraisal fee called for under the License Agreement, while Erdmann contends his expressed willingness to sign the Modification Agreement was rejected.

On August 20, 1986 Preferred notified Erdmann in writing that he was in breach of the License Agreement because he (1) had refused to execute a modified non-competition agreement; (2) had not secured a fidelity bond as required by the License Agreement; and (3) refused to have his employees execute a non-competition/nondisclosure form in the latest form used by Preferred Research. Erdmann was, pursuant to the terms of the License Agreement, granted a period of seven (7) days in which to cure the alleged breaches in order to avoid termination.

The parties continued to confer to no avail. On October 24, 1986 Preferred terminated Erdmann as a licensee. Erdmann thereafter filed suit seeking monetary damages, declaratory and injunctive relief, as well as counsel fees, in the court below alleging breach of contract, tortious interference in plaintiff’s contracts and business prospects, and a violation of the Virginia Retail Franchising Act, Va. Code § 13.1-557 et seq.

[790]*790An amended complaint sought in addition “sums which defendant has refused to pay pursuant to the contract.” Preferred in turn filed a counterclaim seeking monetary damages, attorneys fees and injunctive relief.

The jury awarded plaintiff $17,900.27 for work performed prior to the termination of the agreement. The jury also awarded plaintiff $50,000 in compensatory damages for breach of contract, $50,000 in compensatory damages and $200,000 in punitive damages for tortious interference with a business relationship.

The district court entered J.N.O.V. for defendant on the tortious interference claim and directed the verdict for defendant on the franchise claim. As a result, damages were limited to $67,900.27. Plaintiff moved for a compensatory damage award of $100,000 or for a new trial on breach of contract damages. Said motion was denied.

Discussion

The initial appeal was taken by Preferred asserting three errors below. First, Preferred contends that the Court erred in denying defendant’s motion for a directed verdict on the breach of contract claim. Preferred asserts that Erdmann, in refusing to sign the modification to the non-competition agreement and in not obtaining the bond, did not act in good faith, and thus was the first to breach the contract.

Defendant’s argument is simply not supported by the facts. Erdmann had no duty whatsoever to modify his contract. It was not a breach of good faith for Erdmann to refuse to modify the rights and obligations to which the parties had agreed.

Similarly, the jury determined that Erd-mann’s failure to secure a fidelity bond did not entitle Preferred to terminate the licensing agreement and Preferred has not demonstrated that its finding was in error. The licensing agreement provided as follows:

Licensee agrees to maintain at all times bond coverage in a form satisfactory to Preferred Research, Inc., as to Licensee’s fidelity and as to employee fidelity of each and every officer and employee of Licensee in an amount of not less than One Hundred Thousand Dollars ($100,-000.00), and shall furnish to Preferred Research, Inc., a true copy thereof and satisfactory evidence of the continuing status of such coverage.

Testimony at trial, however, indicated that Preferred rarely enforced this provision and Erdmann was so informed. When Erd-mann eventually sought to secure the bond, he asked Preferred for a clarification of the meaning of “bond coverage in a form satisfactory to Preferred.” He was unable to obtain an explanation sufficiently clear to enable him to secure a bond. Accordingly, the jury’s determination is supported by credible evidence. See ADC Fairways Corp. v. Johnmark Construction, Inc., 231 Va. 312, 343 S.E.2d 90, 92 (1986).

Second, Preferred contends that the district court should not have permitted the jury to consider lost profits as damages. The court instructed the jury that “[plaintiff] must show sufficient facts and circumstances to permit you to make a reasonable estimate of each item, and if he does not show that, he cannot recover for such item.” Preferred concedes that the jury instructions were proper. However, Preferred asserts that, instead of allowing the trier of fact to evaluate the evidence, the court should have ruled that the lost profit evidence was too speculative as a matter of law.

Erdmann operated the business for over nine months prior to the termination of the agreement. He introduced evidence regarding his monthly gross earnings. He further introduced testimony regarding customer satisfaction with the quality of his work. We find that there was sufficient evidence to submit the issue to the jury.

Third, Preferred contends that it was improper for the jury to award the entire amount charged for work conducted prior to the termination because Preferred was entitled to appraisal fees and charge-backs.

The parties stipulated that, following the termination, certain customers of Erdmann [791]*791did not pay within ninety days. This receivables account, labeled chargebacks, amounted to $1,399.56. Furthermore, Preferred expended $1,375 in appraisal fees after Erdmann’s termination on his contracts. Preferred contends that these amounts should have been deducted from the amount awarded in back pay.

The record reveals that Preferred did not sustain its burden on this issue. This Court cannot say that Erdmann was inevitably liable for these charges. For example, some overdue accounts may have eventually been paid.

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Cite This Page — Counsel Stack

Bluebook (online)
852 F.2d 788, 1988 U.S. App. LEXIS 10087, Counsel Stack Legal Research, https://law.counselstack.com/opinion/erdmann-v-preferred-research-inc-of-georgia-ca4-1988.