481 F.2d 781 (5th Cir. 1973), 72-2341, Fredonia Broadcasting Corp., Inc. v. RCA Corp.

Docket Nº:72-2341.
Citation:481 F.2d 781
Party Name:FREDONIA BROADCASTING CORPORATION, INC., Plaintiff-Appellee, v. RCA CORPORATION, Defendant-Appellant.
Case Date:July 02, 1973
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

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481 F.2d 781 (5th Cir. 1973)



RCA CORPORATION, Defendant-Appellant.

No. 72-2341.

United States Court of Appeals, Fifth Circuit.

July 2, 1973

Rehearing Denied Nov. 2, 1973.

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James E. Coleman, Jr., Marvin S. Sloman, Earl F. Hale, Jr., Dallas, Tex., for defendant-appellant.

John Gano, Houston, Tex., Ben Johnson, Dallas, Tex., for plaintiff-appellee.

Before WISDOM, GEWIN and COLEMAN, Circuit Judges.

COLEMAN, Circuit Judge:

RCA contracted to sell UHF color television broadcasting equipment to Fredonia Broadcasting Corporation for the operation of television station, KAEC-TV, in Lufkin, Texas. The station was designated as Channel 19 and was to cover the Lufkin and Nacogdoches area. Fredonia's operation failed. The station began broadcasting on July 30, 1969, and ceased operation on March 18, 1970.

Fredonia sued 1 RCA for fraud, for breach of the sales contract, and for breach of warranty. Fredonia sought actual and punitive damages in the total amount of $2,650,000. RCA counter-claimed for $605,493.80 for the value of the broadcasting equipment delivered.

The District Court submitted the case to the jury under Rule 49(a), Fed.R.Civ.P. 2 The jury was asked to answer

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18 fact questions and two damages questions. The jury found in favor of Fredonia and awarded $850,000 for actual damages and $150,000 for exemplary damages.

On appeal, RCA raises numerous issues concerning the findings as to both liability and damages.

We reverse and remand for a new trial on both issues.


On January 15, 1969, RCA and several other suppliers of broadcast equipment made presentations to a committee of Fredonia's Board of Directors, composed of Dr. Basil Atkinson, chairman of the Board; Al Cudlipp, president; and Edward McFarland, attorney for Fredonia. William Carr, a consulting engineer for Fredonia, was also present. RCA's written proposal, titled Broadcast Equipment Proposal, was explained by its field salesman, George McClanathan, and by its area sales manager, Dana Pratt. At this meeting Fredonia did not make any final decision as to which supplier to choose, but decided to ask for another meeting with RCA.

Cudlipp called McClanathan and asked him to come to Lufkin for a final negotiation session. This meeting was held on February 6, 1969. Atkinson, Cudlipp, and McFarland were present on behalf of Fredonia.

At these meetings Fredonia claims that RCA made several oral representations which induced it to enter into a contract with RCA.

Fredonia claims that RCA represented (1) it would deliver the equipment in time for Fredonia to meet the on-the-air date of June 1, 1969; (2) it would supervise the installation; and (3) it would deliver used and new equipment which would run and operate properly and would be suitable for the purposes for which it was intended. McFarland, Fredonia's attorney, testified that he relied on these representations in advising his client to enter into a contract with RCA. Cudlipp also testified that he relied on these representations.

These oral representations conflict with RCA's written broadcast proposal since that written proposal states: (1) RCA would not be liable in damages for delays in delivery and the buyer could cancel if delivery was not made within the date specified, (2) RCA would not assume responsibility for the installation and operation of equipment if the buyer requested RCA to furnish a representative to supervise the installation, and (3) RCA's warranty for the equipment would not include liability for damages of any kind connected with the use of

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the equipment or its failure to function properly. RCA's written broadcast proposal also states that:

[the] proposal including any modifications or additions agreed to in writing by the parties prior to acceptance by RCA expresses the entire understanding of the parties . . . and no agreement modifying or supplementing the terms of this proposal shall be valid unless in writing duly signed by the parties.

The evidence is conflicting as to whether RCA made misrepresentations as to the date of delivery, degree of supervision, and quality of the equipment and as to whether Fredonia relied on these representations. Both Cudlipp and McFarland testified that McClanathan promised on February 6, 1969, that delivery could be arranged so that Fredonia could meet its air date of June 1, 1969. McClanathan and Pratt both knew that Fredonia was attempting to meet an air date of June 1, 1969. An internal memorandum of RCA, titled Contract Data Sheet, which informed RCA's internal organization of the expected air date, stated that the air date for the new station was estimated to be May 15, 1969. This document also stated that the required delivery date for studio equipment was April 1, 1969, and the required delivery date for the transmitter and the antenna was May 1, 1969.

Other evidence was to the contrary and showed that Fredonia did not expect to be on the air by June 1, 1969. William Carr, Fredonia's consulting engineer, testified for the defendant that he advised his client that July 1, 1969, was a reasonable air date. Carr also testified that Fredonia was delayed because Fredonia did not supply enough personnel to work at installing the equipment. The building to house the station's equipment was not completely finished on May 9, 1969. A letter from Fredonia's Washington attorneys to the FCC states that the anticipated air date was July 1, 1969. McClanathan's representations as to a delivery date can also be interpreted to mean that RCA would ship the equipment within 120 days of Fredonia's acceptance on February 6, 1969, and not that Fredonia would be on the air 120 days from February 6, 1969.

Finally, the evidence shows that permission to construct microwave towers, which were essential for the broadcasting of network programs, was not received until June 5, 1969.

There was evidence that RCA represented through its agents that it would supervise installation of the equipment, but there was also other evidence which showed that Fredonia intended to rely on Carr to supervise the installation. Carr testified that under the terms of his consulting contract he was to be responsible for the installation of the equipment. Correspondence between Carr and Cudlipp corroborates Carr's responsibility. Cudlipp also testified that RCA's Barbour did a lot of work Cudlipp expected Carr to do. Cudlipp also testified that he felt Carr was not at the station as often as he should have been.

While there was evidence to show that RCA represented to deliver operable and suitable equipment and did not do so, there was also evidence to show that Fredonia, itself, might have been at fault in causing the equipment not to operate. Barbour, an RCA employee, testified that when he arrived at the station on June 4, 1969, he found that there were errors made in the installation of the equipment. Barbour also testified that Fredonia experienced problems that were normally to be expected in the starting up of a television station. Other evidence showed that Cudlipp wrote a letter stating that he had a good operating crew, but that they were not very good in the maintenance of the equipment. RCA also introduced testimony that showed it had given Fredonia credit for two inoperable cameras that RCA had delivered. Finally, after RCA's Parker had conducted a proof of performance on the transmitter, Cudlipp wrote Barbour that for Fredonia he accepted the proof of performance. This evidence tended to show that RCA delivered operable equipment and that any

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breakdowns in broadcast transmission was the fault of Fredonia.

The parties disagree as to when a binding contract was made between the parties and disagree as to which documents constituted the contract.

At the February 6, 1969 meeting Fredonia was not satisfied with the exact written terms of RCA's written broadcast proposal and requested three changes. McClanathan, RCA's salesman, said that while he did not have the authority to bind RCA to any revision, he could put Fredonia in touch by telephone with Edwin Tracy, RCA's Division Vice-President of Broadcast Sales, who had authority to accept and approve changes. The three changes Fredonia requested concerned (1) additions and deletions to the proposal, (2) freight charges, and (3) method of down-payment. Tracy agreed to these changes for RCA. RCA contends that these three changes were the only ones made to the written agreement.

McFarland at this meeting [according to his testimony] was concerned that RCA's broadcast proposal did not bind RCA. McFarland, therefore, prepared a letter of acceptance, dated February 6, 1969, which stated that Fredonia accepted RCA's broadcast proposal at a package price of $471,967.00. Fredonia claims that the letter together with the broadcast proposal constitute the contract between the parties. This acceptance letter enumerated the three changes that Fredonia wanted RCA to make in the broadcast proposal.

The letter also stated specifically that a down-payment of 25% of the total price would be made. This 25% downpayment was to be paid in part as follows: (1) $25,000 paid immediately, (2) $50,000 paid on notification the transmitter was ready, and (3) the remainder paid thirty days thereafter. Fredonia sent to RCA's office at Camden, New Jersey, the $25,000 on February 6, 1969. RCA accepted the check and deposited it to its bank account. The February 6, 1969 acceptance letter also detailed the arrangement for the payment of notes to cover the...

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