Larry Duke d/b/a Duke's Vending ("Duke") sued Tom's Foods, Inc., alleging as its sole cause of action intentional interference with business or contractual relations.
In case no. 1021095, Tom's Foods appeals. It challenges the trial court's denial of Tom's Foods' motions for a judgment as a matter of law; contests certain evidentiary rulings by the trial court; argues that the evidence of compensatory damages presented by Duke and relied upon by the jury was so flawed as to require a new trial; and argues that the punitive-damages award, even as remitted, is grossly excessive. In case no. 1021155, Duke appeals from the trial court's order of remittitur.
Because we conclude that the trial court erred in denying Tom's Foods' motion for a judgment as a matter of law, we reverse and remand with directions in case no. 1021095. Because of our resolution of case no. 1021095, we need not consider whether the trial court's order of remittitur was excessive, and we dismiss the appeal as moot in case no. 1021155.
Tom's Foods manufactures snack foods. Tom's Foods distributes its products through independent distributors and company-owned routes.
Dixie purchased and financed some of its vending machines through a division of Tom's Foods. In conjunction with financing those vending machines, Dixie executed certain promissory notes and security agreements to which Tom's Foods was a party. In addition to securing Dixie's debt regarding the vending machines it was purchasing, the security agreements were applicable to:
Dixie used the vending machines purchased under the promissory notes as collateral. In addition, Dixie specifically pledged as collateral all of Dixie's other vending machines, office equipment, trucks, inventory, and cash proceeds. The security agreements provided that the holder of those agreements had a security interest in the following:
In the event Dixie defaulted, the security agreements also gave the secured party the right to repossess the collateral. The agreements also prohibited the transfer of any of Dixie's vending machines without the prior written consent of the secured party.
In 1990, Tom's Foods assigned its rights in the notes and security agreements to Stephens Diversified Leasing, Inc. The assignment of the notes and security interests provided for "recourse by [Stephens] against [Tom's Foods] in the event of default by [Dixie] under the Purchased Receivables."
In 1994 and 1995, Dixie leased additional vending machines from Stephens. Dixie and Stephens signed a master lease agreement ("the lease"), which allowed Dixie to lease additional machines from Stephens at different times. The lease stated, "Except as otherwise provided ... such additional personal property shall be leased upon the terms and conditions herein contained."
The lease also provided that, upon Dixie's default under the lease, all unpaid debts would become due and Stephens was entitled to repossess the leased vending machines without legal process.
At the end of 1996, Dixie experienced severe financial problems and defaulted on its obligations to STI under the promissory notes and the lease. In multiple letters dated January 31, 1997, STI notified Dixie that it was in default under the promissory notes and under the terms of the lease and that STI was accelerating and demanding payment of the entire balance due under the notes and the lease from Dixie. STI advised Dixie that it had 10 days to cure the default or STI would begin repossessing the vending machines. Dixie did not cure the default.
Also in 1996, Dixie failed to make timely payments on merchandise accounts with Tom's Foods and defaulted in servicing Tom's Foods national chain accounts and over-the-counter businesses. As a result, on January 29, 1997, and on January 31, 1997, Tom's Foods terminated Dixie's licensing agreement and Dixie's distributorship agreement, respectively.
On February 18, 1997, STI requested, pursuant to the lease agreement, that Tom's Foods, as STI's agent, repossess the collateral securing the promissory notes and the lease. STI provided Tom's Foods
Tom's Foods began its repossession efforts on February 19, 1997; those efforts continued into March. Tom's Foods either physically picked up the vending machines from their locations or repositioned them so they were inaccessible to the public or placed repossession stickers on them.
Tom's Foods also wanted to expand its business in the Dothan area. Therefore, in addition to repossessing Dixie's vending machines and servicing its national chain accounts and over-the-counter businesses in the area, Tom's Foods employees began soliciting businesses, schools, and recreation centers regarding their vending accounts. Tom's Foods employees made many of these solicitations for new vending accounts when they located Dixie's vending machines in their repossession efforts. Thus, Tom's Foods began soliciting some of Dixie's vending accounts.
Larry Duke d/b/a Duke's Vending
Larry Duke, the sole proprietor of Duke's Vending, testified that, at the end of 1996 or early in 1997, he learned that Dixie was experiencing financial trouble.
Todd Mims, one of the owners of Dixie, testified that, upon reaching an agreement with Duke, he drafted a letter to Dixie's vending-account customers informing them that Dixie had sold its vending machines to Duke and that Duke would service their vending accounts from that point forward. This letter was undated. However, it is clear that when Dixie sent this letter to its customers, no agreement regarding the purchase transaction had been executed and Dixie's debt to STI had not been paid. In fact, Duke had not yet obtained financing for the transaction.
Duke began servicing Dixie's vending accounts in mid-February, immediately after reaching the oral agreement with Dixie.
Duke claimed that, at approximately the same time he began servicing Dixie's accounts, Tom's Foods began its repossession efforts. As noted, those efforts consisted of placing repossession notices on Dixie's vending machines, turning machines around so that they were inaccessible to customers, or physically removing machines from Dixie's account locations. Duke alleged that, because he had replaced some of Dixie's vending machines
Additionally, Duke claimed that employees of Tom's Foods "crow-barred their way in" to some of Dixie's vending machines and to some of his own that he had placed at Dixie account locations; Duke claimed that when they did so the employees removed whatever product was inside the vending machine and replaced it with a Tom's Foods product.
Duke also complained that Tom's Foods employees began improperly soliciting Dixie's account holders; Duke alleges that, in some instances, Tom's Foods simply replaced Dixie's (or Duke's) vending machines with its own and that those actions were taken without the permission or knowledge of the customer. Duke asserts that those actions interfered with his efforts to obtain or retain Dixie's accounts.
Duke testified that, on some unspecified date, he and Kuntz met again and Kuntz asked Duke to provide the locations of Dixie's vending machines. According to Duke:
Duke testified that he believed Tom's Foods was legally entitled to know where Dixie's vending machines were located and that Duke needed to stop Tom's Foods from repossessing the machines in order to save his agreement with Dixie. Duke claimed that he had no problem selling Tom's Foods products in his or Dixie's
Tom's Foods claimed that it first learned of Duke's involvement with Dixie in late February. On March 7, 1997, Tom's Foods sent Duke a letter demanding that Duke stop using Dixie's vending machines because of the lien STI had on the machines.
Duke acknowledged at trial that, in February and March 1997, he and Tom's Foods were both competing to obtain the vending-machine accounts Dixie had abandoned. Duke, however, claimed that he was acting as an agent for Dixie and that he, therefore, had authority to service those accounts.
Todd Mims testified at trial that Duke was servicing Dixie's vending accounts and using Dixie's vending machines until Duke and Dixie could finalize the purchase transaction. Mims testified that Duke was acting "as Dixie's agent" until the purchase transaction could be completed. Mims also testified that Duke was told that STI had a lien on Dixie's vending machines and that both he and Duke knew that the deal could not be consummated without the approval of STI and Tom's Foods.
On March 19, 1997, Duke's attorney notified Dixie's attorney that the purchase transaction was "off." According to the notes maintained by Dixie's attorney, Duke's attorney had advised Duke "not to proceed" with the proposed transaction
On December 16, 1997, Duke and Dixie sued Tom's Foods, alleging intentional interference with business or contractual relations. Both Dixie and Duke asserted that Tom's Foods had interfered with Dixie's attempt to sell its vending machines and its vending-machine accounts to Duke. Tom's Foods answered the complaint with a general denial. Tom's Foods also asserted affirmative defenses of justification and a legitimate economic motive and/or bona fide business competition. In its answer, Tom's Foods also asserted counterclaims alleging breach of contract, open account, account stated, wrongful detention, and conversion against Dixie, Ronnie Mims, and Todd Mims; those counterclaims arose out of numerous vending accounts, promissory notes, and leases executed in favor of Tom's Foods by Dixie and/or Ronnie Mims and Todd Mims. Tom's Foods alleged that its losses amounted to $208,386.18 plus attorney fees and costs.
On October 24, 2002, Tom's Foods moved for a judgment as a matter of law as to the claims asserted against it by Duke and Dixie. As to Dixie's claim of intentional interference, Tom's Foods argued that it was entitled to a judgment as a matter of law because, it argued, (1) STI and Dixie were parties to a business relationship involving Dixie's equipment, including the vending machines, (2) Tom's Foods was acting as STI's agent at all times relevant to the repossession and was legally justified in repossessing Dixie's vending machines, and (3) because Tom's Foods was acting as STI's agent, Tom's Foods was not a stranger to any of Dixie's dealings involving the vending machines or any of its other equipment.
As to Duke's claim of intentional interference, Tom's Foods argued that it was entitled to a judgment as a matter of law because, it argued, (1) Tom's Foods was acting as STI's agent in repossessing Dixie's vending machines (which Duke had not purchased at the time of the repossession), (2) Duke had no right to use Tom's Foods logos (that were apparently displayed on some of Dixie's machines) in its business, and (3) Tom's Foods was competing with Duke to obtain the abandoned Dixie vending-machine accounts and did not act wrongfully in pursuing those accounts. The trial court denied Tom's Foods' motion.
The case went to trial. At the close of the defendant's evidence, Dixie entered a stipulation of dismissal with prejudice as to its claim of intentional interference asserted against Tom's Foods; Tom's Foods also entered a stipulation of dismissal as to all counterclaims asserted against Dixie, Ronnie Mims, and Todd Mims. Duke's claim of intentional interference with business or contractual relations was the only claim submitted to the jury.
The jury returned a verdict in favor of Duke, awarding him $500,000 in compensatory damages and $4 million in punitive damages. Tom's Foods filed a motion for a new trial, or in the alternative, for a remittitur. Tom's Foods also filed a motion for a judgment as a matter of law, pursuant to Rule 50(b), Ala. R. Civ. P. The trial court denied Tom's Foods' postjudgment motion for a judgment as a matter of law. The trial court also denied Tom's Foods' postjudgment motion for a new trial, conditioned on Duke's accepting an order of remittitur of the punitive damages award from $4 million to $750,000.
Tom's Foods appeals from the denial of its postjudgment motions, making the following arguments:
Duke appeals from the trial court's order of remittitur, asserting that the original $4 million punitive-damages award was supported by the evidence and should be reinstated.
Standard of Review
In Waddell & Reed, Inc. v. United Investors Life Insurance Co., 875 So.2d 1143, 1152 (Ala.2003), this Court stated the standard to be applied when reviewing a trial court's ruling on a motion for a judgment as a matter of law:
In Parsons v. Aaron, 849 So.2d 932 (Ala.2002), this Court discussed extensively the elements of the tort of intentional interference with business or contractual relations:
849 So.2d at 946-47.
In Waddell v. Reed, Inc., supra, this Court recognized that "[a] defendant is a party in interest to a [business or contractual] relationship if the defendant has any beneficial or economic interest in, or control over, that relationship." 875 So.2d at 1154. Waddell and Parsons also relied upon the case of Atlanta Market Center Management Co. v. McLane, 269 Ga. 604, 608, 503 S.E.2d 278, 282 (1998). In Atlanta Market Center, the Supreme Court of Georgia stated:
269 Ga. at 608-09, 503 S.E.2d at 282-83.
Duke's Claim that Tom's Foods Tortiously Interfered with the Purchase of Dixie's Vending Machines
Duke first claims that Tom's Foods tortiously interfered with his proposed purchase transaction with Dixie. Specifically, he alleges that Tom's Foods interfered with his purchase of Dixie's vending machines. We disagree because, based on the above-cited authorities, Tom's Foods was not a stranger to the contractual or business relationships involving Dixie and Duke and therefore cannot be liable for tortious interference with that relationship.
First, Tom's Foods, Dixie, and STI are "`all parties to a comprehensive interwoven set of contracts.'" See Atlanta Market Center, 269 Ga. at 609, 503 S.E.2d at 283. As established above, in accepting the assignment of the security agreements, STI retained a right of recourse against Tom's Foods in the event Dixie defaulted on the promissory notes. Thus, Tom's Foods had an economic interest in the relationship between STI and Dixie. See Waddell, supra.
Second, Tom's Foods was at all times acting as STI's agent and, for purposes of repossessing Dixie's vending machines, stood in the shoes of STI. STI had a legal right to repossess Dixie's equipment, including its vending machines. As STI's agent, Tom's Foods had no more and no less right than STI had. As STI's agent, Tom's Foods was within its right to repossess the vending machines and to collect the moneys from those machines because STI would have been within its rights to do so. See Parsons, supra; Atlanta Market Center, supra; and Colonial Bank v. Patterson, 788 So.2d 134 (Ala.2000) (holding that a defendant could not be liable for tortious interference with a business relation where the defendant merely exercised its legal rights).
Third, Tom's Foods cannot be a stranger to the business relationship between Dixie and STI because Tom's Foods was involved in creating that relationship. Without the relationship between Tom's Foods and Dixie, which included a licensing agreement, a distributorship agreement, and a lender-borrower relationship (pursuant to which Tom's Foods remained liable even after the notes and security agreements were assigned to STI), STI would have had no relationship with Dixie. See, e.g., Waddell, supra, Parsons, supra, and Atlanta Market Center, supra, and Jefferson-Pilot Comm. Co. v. Phoenix City Broadcasting, 205 Ga.App. 57, 60, 421 S.E.2d 295 (1992).
Fourth, at all times relevant to this action, Duke was acting as Dixie's agent. Although Duke was contemplating the purchase of Dixie's vending machines, that purchase transaction had not been completed and could not be completed without the approval of both STI and Tom's Foods; neither of those entities had approved the proposed transaction. Thus, at all times relevant to this dispute, Duke was merely acting as an agent for Dixie. Therefore, Duke stood in Dixie's shoes and had no more right to retain the vending machines than did Dixie.
Under these facts, Tom's Foods, STI, Dixie, and Duke were all parties to an interwoven set of contracts and business relationships, and Tom's Foods cannot be liable for tortiously interfering with a contract or business relationship to which it is a party. Additionally, under Alabama law, Tom's Foods is insulated from liability for tortious interference as a result of its repossession
Duke's Allegations that Tom's Foods Interfered with Customer Accounts
Duke also claimed that, in addition to interfering with his purchase of Dixie's vending machines, Tom's Foods interfered with business relationships purportedly existing between Duke and Dixie's vending-account customers.
These allegations cannot, as a matter of law, establish a viable claim of tortious interference with any business relationship existing between Duke, on the one hand, and Dixie's vending-account customers, on the other, for two reasons. First, we agree with Tom's Foods that "the Duke-Dixie proposal and whatever relations Duke had relative to Dixie's customers were all part of a set of `interwoven contractual arrangements.' "(Tom's Foods brief at p. 18.) We have already concluded that Tom's Foods had a legal right to repossess all of Dixie's vending machines, that both Tom's Foods and STI had to approve the proposed Dixie-Duke purchase transaction before it could be completed, and that Tom's Foods had a legitimate economic interest in the security agreements and promissory notes at issue. For those reasons, we held that Tom's Foods, STI, Dixie, and Duke were all party to a set of interwoven contracts and, therefore, that Tom's Foods could not be liable for tortious interference with the Dixie-Duke proposed purchase transaction as a result of its repossession efforts.
We also recognize that Duke had nothing more than a prospect of obtaining for himself all of Dixie's vending-account customers. As noted earlier, all of those accounts were "at will." An "at-will" contract is not property or an asset that can be bought and sold to the total exclusion of others.
Our conclusion that the competition between Tom's Foods and Duke for the vending account customers' business was too interwoven with the repossession aspects of this case to constitute tortious interference with a business relation is further buttressed by the fact that Duke did not claim a separate category of damages attributable to the loss of Dixie's vending-account customers. The only damages Duke claimed at trial resulted from the failure to finalize the proposed Dixie-Duke purchase transaction; this transaction included the proposed purchase of Dixie's vending machines and Duke's list of its vending-account customers. Under the facts of this case, the purchase of the vending machines and the vending-account-customer list are all part of the same set of interwoven contracts. The evidence indicates that Tom's Foods had a lawful right to repossess Dixie's vending machines, and the exercise of that lawful right, in turn, disrupted Dixie's (or its agent's) opportunity to service those machines at account locations. Nothing in this rises to the level of tortious interference.
Second, even if Tom's Foods and Duke were not parties to a set of interwoven contracts, we conclude that the "competitor's privilege" would apply to refute Duke's allegation that Tom's Foods tortiously interfered with a business relationship existing between Dixie's vending-account customers and Duke. "The competitor's privilege applies when the contract involved is terminable at will or when the defendant causes a third person not to enter into a prospective contract with another who is his competitor." Soap Co. v. Ecolab, Inc., 646 So.2d 1366, 1369 (Ala.1994). Restatement (Second) of Torts § 768 (1979) states:
Comment b to § 768 states:
Comment e to § 768 continues, discussing the "wrongful means" element of the competitor's privilege:
We also note that the Alabama Supreme Court has quoted with approval the following interpretation of the "wrongful means" required to establish tortious interference with existing at-will contracts or to establish tortious interference with prospective contracts:
Soap Co., 646 So.2d at 1370 (quoting with approval Great Escape, Inc. v. Union City Body Co., 791 F.2d 532, 543 (7th Cir.1986)).
Thus, the competitor's privilege recognizes some types of interference among rivals competing to obtain existing at-will accounts or prospective accounts. Also, in scrutinizing an alleged tortious interference with existing at-will accounts or with prospective business relations, it is not necessary to conduct a comprehensive inquiry into all of the actor's possible motives; all that is required is (1) that the
Duke did not produce substantial evidence indicating that Tom's Foods used wrongful means in interfering with any prospective relationship with Dixie's vending-account customers. First, Duke admitted in his deposition that Tom's Foods repossession of any of his machines appeared to be the result of a mistake on Tom's Foods part. Despite the earlier deposition testimony that any repossession of his machines appeared to be by mistake, Duke argued at trial that Tom's Foods repossessed, by placing repossession stickers on, machines bearing "Doritos" stickers rather than Tom's Foods logos and, therefore, that Tom's Foods must have known that those vending machines did not belong to Dixie. Duke alleges that this constitutes evidence of Tom's Foods' wrongful motive and, thus, evidence of the wrongful means used by Tom's Foods to interfere with Duke's relationship with Dixie's vending-account customers. However, Duke then acknowledged that not all of Dixie's vending machines bore a Tom's Foods logo.
Second, it is significant that Duke failed to allege that any of Tom's Foods actions were directed at him instead of at Dixie. Duke does not allege that Tom's Foods said anything false or even derogatory about Duke to the vending customers. Duke did not call any of Dixie's former vending-account customers to testify that they were coerced or defrauded into doing business with Tom's Foods and, for all that appears in the record, those customers freely elected to do business with Tom's Foods.
Likewise, Duke does not allege that Tom's Foods set out to repossess vending machines belonging to Duke. The record contains no evidence indicating that Tom's Foods went into the Dothan area looking for Duke's machines; conversely, the record indicates that Tom's Foods set out to locate Dixie's vending machines and to repossess those machines on STI's behalf. Tom's Foods had every right to do so. Tom's Foods may have "repossessed" a few of Duke's vending machines, but there is no evidence to show that Tom's Foods intended to do so; from all appearances, Tom's Foods had no knowledge that Duke had replaced some of Dixie's machines with his own.
We acknowledge that whether the means of interference used was wrongful or improper and, therefore, unjustified, is generally a question of fact. See, e.g., Gross v. Lowder Realty, 494 So.2d at 597 n. 3 (discussing the element of justification and the factors to be balanced in making this determination). Here, however, the only allegation is that Duke lost the opportunity to obtain vending accounts as a result of Tom's Foods' repossessing Dixie's vending machines, which it had the right to do, and by Tom's Foods' placing its own vending machines at those vending-account locations.
We conclude that the trial court erred in denying Tom's Foods motion for a judgment as a matter of law. In case no. 1021095, we reverse the judgment entered by the trial court and remand the cause for the trial court to enter a judgment in favor of Tom's Foods. We dismiss the appeal in case no. 1021155 as moot.
1021095 — REVERSED AND REMANDED WITH DIRECTIONS.
1021155 — APPEAL DISMISSED AS MOOT.
NABERS, C.J., and SEE, BROWN, and HARWOOD, JJ., concur.
This "Final Agreement" was never executed, and the transaction proposed in this agreement was never consummated.
Duke also complained that Tom's Foods placed a repossession sticker on one of his machines located at the peanut mill in Headland. Duke testified that Tom's Foods should have known that Dixie did not own that vending machine because it had a "Doritos" sticker on it rather than a Tom's Foods logo. However, Duke also acknowledged that not all of Dixie's vending machines bore Tom's Foods' stickers.