Triple R Industries, Inc. v. Century Lubricating Oils, Inc.

912 F.2d 234, 1990 WL 120260

• Court: Court of Appeals for the Eighth Circuit
• Decided: August 21, 1990
• Docket: Nos. 89-2250, 89-2335
• Status: Published

Opinions

HEANEY, Senior Circuit Judge.

Triple R Industries, Inc. brought suit against Century Lubricating Oils, Inc.,¹ alleging that Century, Triple R’s supplier, had tortiously interfered with Triple R’s business relationship with Union Pacific Railroad. Century counterclaimed for money due on orders placed by Triple R. The district court entered a directed verdict in Century's favor on its counterclaim. The jury found Century liable for tortious interference and awarded Triple R $300,000 in damages.² The district court granted judgment notwithstanding the verdict in favor of Century, holding that Triple R had failed to prove that Century engaged in tortious conduct and that Triple R had failed to prove damages with certainty. Triple R appeals from the judgment notwithstanding the verdict. Century cross-appeals from the district court’s refusal to grant interest on its counterclaim.³ We believe that there was sufficient evidence to support a jury finding of liability, and sufficient evidence to support an award of $213,714 in damages to Triple R. We direct that a new trial be held to determine Triple R’s damages unless Triple R agrees to a remittitur to $213,714. We also hold that Century was entitled to interest on its counterclaim in the amount fixed by the purchase contracts between the parties.

I.

Judgment notwithstanding the verdict is proper where the evidence is not sufficient to create an issué of fact for the jury. To sustain a district court’s grant of judgment notwithstanding the verdict, we must find that all the evidence points one way and is not susceptible of a reasonable interpretation supporting the non-moving party’s case. Brown v. Syntex Laboratories, Inc., 755 F.2d 668, 671 (8th Cir.1985).

A.

To prevail on a cause of action for tortious interference with a business relationship, the plaintiff must prove:

(1) The existence of a valid business relationship or expectancy; (2) Knowledge by the interferer of the relationship or expectancy; (3) An intentional act of interference on the part of the interferer; (4) Proof that the interference caused the harm sustained; and (5) Damage to the party whose relationship or expectancy was disrupted.

Mike Pratt & Sons, Inc. v. Metalcraft, Inc., 222 Neb. 333, 383 N.W.2d 758, 763 (1986). We believe that Triple R introduced sufficient evidence to carry its burden of proof with respect to each element of the tort. The district court’s contrary conclusion is based on its erroneous belief that the jury could not find that Century promised not to compete with Triple R for Union Pacific orders. We review the evidence which supports Triple R’s claim.

Century had tried to sell its lubricants to Union Pacific without success before it entered into an agreement with Triple R. Trial transcript 176-81 (Tr.). Union Pacific was a difficult customer to develop a relationship with. Suppliers had to be on an approved supplier list. Union Pacific took six to ten months to approve lubricants. A salesman had to make “hundreds” of calls to get a particular product approved. Sales were made either by soliciting bids or through direct negotiations with individual suppliers. Tr. at 32.

Triple R Industries was operated by Er-vin Rogers. Its shareholders were Rogers, Rogers’ wife, and his two sons. Triple R was a broker that purchased and resold business products, usually lubricants, in the Omaha area without warehousing the products. One of Triple R’s long-term customers was Union Pacific Railway. In 1981, Rogers entered into an agreement to sell Century lubricants. For all practical purposes, Rogers was the sole distributor of Century lubricants in the Omaha area in 1981. Century provided Rogers with technical support and lubricants under Triple R’s label for Triple R’s customers, including Union Pacific. The agreement between Triple R and Century included account coordination, whereby Rogers had the exclusive right to sell to certain customers, including Union Pacific. Tr. at 26, 28; exhibits 4 and 5 (Ex.). Rogers disclosed to Century Triple R’s customer lists and relevant sales information upon Century’s reassurance that the sole purpose for requiring this information was to avoid direct competition between it and Triple R. Tr. at 26. Triple R received Union Pacific’s approval for Century’s lubricant. Ninety percent of Triple R’s sales in 1982 and 1983 were made to Union Pacific. Tr. at 31.

In 1984, Rogers paid a call on Union Pacific offices and encountered the Century Custom Sales Manager. Tr. at 44, 168. Rogers testified that a Union Pacific employee told him that the Century representative had suggested to Union Pacific that Century deal direct with Union Pacific. Tr. at 46. Rogers testified that thereafter he had to bid for Union Pacific business at lower and lower prices because someone kept undercutting his bid. “I’d bid the next one at the same price, I’d miss it, so somebody else was following the same downward pricing pattern that I was and I didn’t know who it was.” Tr. at 47. In late 1984, Rogers began bidding at a loss to maintain Union Pacific as a client while he searched for another supplier. Id. Century was bidding directly for Union Pacific orders against Triple R in 1985. Tr. at 114. By January of 1986, Triple R’s account at Century became delinquent in the amount of $62,661.36, reduced by subsequent payments to $51,833.59. On January 7, 1986, Triple R was put on credit hold and shipments were frozen. Tr. at 195.⁴ Triple R submitted partial payment by check. The check was dishonored, and its account with Century was frozen a second time. A Century employee, Paul Pattavina, testified that he went to work for Precision Bearing to establish a lubrication program on January 1, 1986, in advance of Triple R’s credit hold and termination. One-half of Pattavi-na's salary was paid by Century and one-half was paid by Precision. Tr. at 143. On January 22, Precision was appointed Century’s exclusive representative in the Omaha area. Ex. 18-B. Century informed all of its indirect customers that Precision was the new distributor. Because of delays in receiving lubricant, Union Pacific cancelled its order with Triple R on March 14, 1986. Ex. 12. Century resumed supplying lubricant to Union Pacific through other suppliers. Tr. at 183.

It took Rogers a year and a half from October 1984 to find another volume supplier, Exxon, interested in distributing lubricants through Triple R. Tr. at 47-48. Rogers began submitting Exxon lubricants for approval to Union Pacific. Century, however, had informed Union Pacific that Triple R had credit problems. Union Pacific then removed Triple R from its approved list. Tr. at 50. Exxon subsequently dropped Triple R. Tr. 50-51. Triple R lost money in 1985 and 1986 and went out of business in 1986. Tr. at 59.

We believe this evidence is sufficient to support a finding of liability. The jury could infer that Century entered into a distributorship agreement with Triple R in order to become Union Pacific’s indirect supplier. In return, Century promised not to compete with Triple R for Union Pacific orders. Through Rogers’ efforts, Century lubricants were approved for purchasing. The jury could conclude that Century broke its promise not to compete, undercut Triple R’s price, terminated Triple R’s supply, and prevented Triple R from competing with Exxon lubricants. The district court erred by re-weighing this evidence and granting a judgment notwithstanding the verdict.

B.

Under Nebraska law, “prospective profits from an established business, prevented or interrupted by the tortious conduct of the defendant, are recoverable when it is proved (1) that it is reasonably certain such profits would have been realized except for the tort, and (2) that the lost profits can be ascertained and measured, from evidence introduced, with reasonable certainty.” K & R, Inc. v. Crete Storage Corp., 194 Neb. 138, 231 N.W.2d 110, 114 (1975); Diesel Service, Inc. v. Accessory Sales, Inc., 210 Neb. 797, 317 N.W.2d 719, 725 (1982). The certainty requirement for the recovery of lost profits balances the defendant’s right to avoid liability out of proportion to its culpability against the plaintiffs right to full compensation. Cf. Miller v. Kingsley, 194 Neb. 123, 230 N.W.2d 472, 474 (1975) (“The measure of recovery in all civil cases is compensation for the injury sustained.”). “Such lost profits must not be speculative, remote or imaginary_” K & R, 231 N.W.2d at 114. “The law generally is unfavorable to the recovery of losses of profits in tort actions.” Id. (citing Kaufman v. Tripple, 180 Neb. 593, 144 N.W.2d 201, 207 (1966)).

More recently, the Nebraska Supreme Court has emphasized that “[ujncer-tainty as to the fact of whether any damages were sustained at all is fatal to recovery, but uncertainty as to amount is not.” El Fredo Pizza, Inc. v. Roto Flex Oven Co., 199 Neb. 697, 261 N.W.2d 358, 364 (1978) (citing Fisher v. Hampton, 44 Cal.App.3d 741, 118 Cal.Rptr. 811 (1975)); see also J’Aire Co. v. Gregory, 24 Cal.3d 799, 157 Cal.Rptr. 407, 411-13, 598 P.2d 60, 64-66 (1979) (increasing tolerance of lost profit claims). In K & R, the plaintiff failed to prove damages where the food commodity involved fluctuated greatly in profitability and where the plaintiff submitted no business records to substantiate his estimates. Id. at 115; see also Suhr v. City of Scribner, 202 Neb. 364, 275 N.W.2d 596, 599 (1979) (no business records). In El Fredo, reeovery for the lost profits of a new franchise business were allowed where business records and testimony reasonably established some economic injury. El Fredo, 261 N.W.2d at 364-67 (ordering remittitur). Similarly, the jury verdict was upheld in Diesel Service, Inc. v. Accessory Sales, Inc., 210 Neb. 797, 317 N.W.2d 719, 725 (1982), where past sales records permitted the jury to reasonably estimate lost profits. Thus, under Nebraska law, the key to establishing lost profits is the establishment of a course of business activity through business records. Id.; Suhr, 275 N.W.2d at 599; El Fredo, 261 N.W.2d at 365.

There was substantial evidence to support the jury’s conclusion that Triple R would have realized continuing profits but for Century’s wrongful conduct. Triple R had a longstanding business relationship with Union Pacific. There was no testimony that Union Pacific was dissatisfied with the lubricant or service prior to Century’s credit hold. The evidence reflects purchase contracts in force in 1985 and 1986 until an order was cancelled by Union Pacific when Triple R was unable to deliver supplies. Most importantly, there was evidence from which the jury could infer that absent Century’s interference with the business relationship between Triple R and Union Pacific, that Triple R’s profit margin in fiscal 1983 would have continued through fiscal 1984.

Whether Triple R proved its damages with reasonable certainty is a closer question. Rogers estimated that Union Pacific accounted for ninety percent of Triple R's sales in 1982 and 1983. Triple R submitted tax records⁵ which are sufficient to prove some damages in light of its theory that Century’s wrongful competition caused the total failure of its business thereafter and hindered Triple R’s ability to succeed with its mitigation strategy of finding a replacement supplier.⁶ These exhibits disclosed gross sales in Triple R’s fiscal year 1983 of $1,257,623. The cost of goods sold was $1,101,977, leaving a gross profit of $155,646 and a pre-tax profit of $55,975. In fiscal year 1984, gross sales declined by approximately $200,000 to $1,051,065. The cost of goods sold was $1,033,528, and Triple R incurred a net loss of $157,739. The jury could infer that this loss was caused by Century’s interference, which caused Triple R to bid at a loss to retain the business.

The merchandise costs in 1983 and 1984 are similar, suggesting similar volume sales for the two years. Triple R’s past profits provide the basis for a reasonable estimate of expected profits in fiscal 1984 of $55,975 if Triple R had been able to continue to sell lubricant to Union Pacific without cutting its price. Thus, the loss of an expected pre-tax profit of $55,975, together with an operating loss of $157,739, provides a measure of damages in the sum of $213,714. While the evidence supports the conclusion that there were continuing damages thereafter, the business records provided could not enable the jury to determine with reasonable certainty damages in future years.

Because both grounds of the district court’s decision are erroneous, we reverse the district court’s grant of judgment notwithstanding the verdict. Because the damages awarded are clearly excessive, however, we remand for a new trial on the issue of damages unless Triple R agrees to a remittitur in the amount of $213,714.

II.

Century cross appeals from the district court’s failure to award interest on its counterclaim. The counterclaim represents Triple R’s unpaid purchases from late 1985 and early 1986. The trial court awarded Century $51,833.59. Both parties agree that interest should be awarded if the amount in dispute was liquidated. See Philip G. Johnson & Co. v. Salmen, 211 Neb. 123, 317 N.W.2d 900, 905 (1982) (claim is unliquidated if there is controversy as to right of recovery and amount).

We disagree with the district court’s conclusion that the amount of the counterclaim was not liquidated. The amount due was fixed by individual purchase orders. In its amended counterclaim, Century fixed the amount at $51,833.59 plus finance charges.⁷ Triple R did not contest this amount, and a directed verdict was granted allowing Century only the principal owed. The district court, however, concluded that the amount was unliquidated, relying on the pre-trial order and a September 1986 letter from Century’s counsel requesting payment of $52,578.32. The pre-trial order, however, is insufficient to create a dispute as to whether Triple R owed money to Century since it simply lists the matter as disputed. A mere denial does not create a real controversy, especially where, at trial, Century’s claim was uncontested. Nor can the September letter convert the otherwise fixed amounts of the invoices to an unliqui-dated sum. The $52,578.32 figure likely reflects the finance charges which were beginning to accumulate. The existence of finance charges at a fixed rate does not render a sum unliquidated. Century was entitled to the finance charges agreed upon by the parties. Neb.Rev.Stat. § 45-103 (1988) (interest at statutory rate unless a different rate is agreed upon by the parties). The district court’s contrary conclusion would mean that where an interest rate on unpaid sums is fixed by contract, the creditor is not entitled to either prejudgment interest or the agreed upon interest.

III.

Accordingly, we reverse the judgment of the district court. This case is remanded to the district court for disposition consistent with this opinion. Triple R must file in the district court within fifteen days of the issuance and filing of the mandate in the district court, a consent to a remittitur in the sum of $213,714 or a new trial will be granted by the district court on the issue of damages.

1 . Triple R was formerly known as Rogers and Sons and Century Lubricating was formerly called Century Hulbert. We refer to them as Triple R and Century.

2 . Triple R also alleged breach of contract and violation of the Robinson-Patman Act. The district court granted a directed verdict for Century on these claims. Triple R does not appeal from these decisions.

3 .Century also appeals from the trial court's refusal to rule on Century’s motion for a new trial. We find no merit in this appeal.

4 . Triple R had been delinquent before. It had always paid for its purchases, however, and never before been put on credit hold. Tr. at 195, 209, 214.

5 . Triple R admitted its tax return from 1983 and two returns from 1984 when it converted to an S corporation. Exhibit 23-A was a return for a partial year, March 1, 1985 through July 31, 1985. Exhibit 23-B is a return for the period August 1, 1984 through February 28, 1985. Exhibit 23-C is a return for August 1, 1983 through July 31, 1984.

6 . The partial transcript does not disclose whether Century argued at trial that Triple R failed to mitigate its damages. Century does not raise this issue on appeal.

7 . Century’s initial counterclaim filed with its answer did not specify an amount.