TCP Industries, Inc. v. Uniroyal, Inc.

• Decision Date: 17 November 1981
• Docket Number: No. 80-1010,80-1010
• Parties: 32 UCC Rep.Serv. 369, 9 Fed. R. Evid. Serv. 742 TCP INDUSTRIES, INC., Plaintiff-Appellee, v. UNIROYAL, INC., Defendant-Appellant, Donald C. Fresne, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 542

661 F.2d 542

32 UCC Rep.Serv. 369, 9 Fed. R. Evid. Serv. 742

TCP INDUSTRIES, INC., Plaintiff-Appellee, v. UNIROYAL, INC., Defendant-Appellant, Donald C. Fresne, Defendant-Appellee.

No. 80-1010.

United States Court of Appeals,

Sixth Circuit.

Argued June 2, 1981.

Decided Sept. 29, 1981.

Rehearing Denied Nov. 17, 1981.

Robert M. Klein, Leslie W. Fleming, Detroit, Mich., Sidney P. Howell, New York City, for defendant-appellant.

W. Merritt Jones, Jr., Nancy L. Hutcheson, Hill, Lewis, Adams, Goodrich & Tait, Detroit, Mich., for plaintiff-appellee.

Before ENGEL, KEITH and KENNEDY, Circuit Judges.

CORNELIA G. KENNEDY, Circuit Judge.

TCP Industries, Inc. (TCP) filed this breach of contract action against Uniroyal, Inc. (Uniroyal) to recover profits lost when Uniroyal refused to purchase butadiene pursuant to an April 1, 1974 contract. Uniroyal counterclaimed seeking damages from TCP and Donald C. Fresne (Fresne), its president and principal shareholder, for fraud, breach of an earlier 1970 contract, and breach of the 1974 contract. The jury returned a verdict for TCP in the amount of $1,045,650 and judgments of no cause of action on Uniroyal's three counterclaims. Uniroyal appeals. The parties agree that the Uniform Commercial Code applies. They did not object to the District Court's application of Michigan law, the law of the forum.

Butadiene is a petrochemical product extracted from gas and oil and principally used in the production of synthetic rubber. TCP does not produce butadiene but has since 1966 acted as a middleman in arranging sales of the product from El Paso Products Company (El Paso), a Texas refinery, to Uniroyal. TCP sold to Uniroyal at the same price it purchased butadiene from El Paso. Historically, its sole profit was limited to a commission or a reseller's discount of two-tenths (2/10) of a cent per pound which El Paso paid TCP out of El Paso's price.

On November 3, 1970, TCP and Uniroyal entered into the 1970 contract. That contract covered the period of April 1, 1971 through March 31, 1974 and provided for the annual sale of 50 million pounds of butadiene at 8.00 to 8.25 cents per pound, depending on place of delivery. The contract restricted any price increase to the third year of the contract and then only to passing on those escalations in El Paso's production costs specifically related to increased labor or natural or butane gas costs which El Paso passed on to TCP. The contract also included a meet or release clause which provided that if Uniroyal received a bona fide offer from another producer to sell it at least 10,000,000 pounds of butadiene at a lower price, then TCP would have to meet that price within 30 days or release Uniroyal from its obligation to purchase such amount under the contract.

El Paso continued to sell butadiene to TCP which resold it to Uniroyal under these conditions until September 1973, six months before the expiration of TCP's contract with Uniroyal, when, unknown to Uniroyal, TCP's three year contract with El Paso expired. El Paso thereupon advised TCP that it would continue to sell it butadiene but that its reseller's discount would be discontinued and TCP should look for its profits solely from its markup to Uniroyal.

In October 1973, TCP increased its price to Uniroyal by .00247 per pound. In February 1973, El Paso increased its price to TCP by 3.5 cents to 11.75 cents per pound. TCP passed this price increase on to Uniroyal along with an additional increase of almost three cents. On March 1, 1974, TCP initiated another one cent per pound increase. ¹ Uniroyal continued to accept and pay for butadiene at the increased prices. The parties agree and it is undisputed that except for El Paso's 3.5 cent increase passed along by TCP in February, the remaining increases were contrary to the express provisions of the written contract, and resulted in an overcharge to Uniroyal of $301,679.

During the same period that TCP was raising the price of butadiene under the 1970 contract, the parties were negotiating the terms of the 1974 contract. These negotiations were conducted in an atmosphere described by those in the industry as nothing less than chaotic. Price controls for butadiene expired in early 1974. Because of the shortage of crude oil due to the Arab oil embargo, a greater proportion of the supply of oil was being used to produce fuel oil rather than petrochemicals such as butadiene. Butadiene sellers were refusing to take on new customers. Since Uniroyal could not make synthetic rubber without butadiene, TCP's 50 million pound annual supply was extremely valuable and Uniroyal adopted measures to ensure itself of this dependable supply of butadiene. After several months of bargaining, Uniroyal and TCP entered into a new contract which represented a dramatic departure in form and substance from their previous agreements. This contract did not have a price escalation clause but instead contained the following pricing provision:

The price for butadiene purchased hereunder shall be $0.1347 per pound F.O.B. point of origin. The price for butadiene is subject to change providing Texas Chemical gives no less than fifteen days notice.

The 1974 contract did not contain a meet or release clause for the first two years of its four year term.

Soon after signing, TCP informed Uniroyal that the price would increase from 13.7 cents on April 1, 1974, to 20.75 cents on July 1, and to 22.55 cents on October 1. By November 1974, the shortage of butadiene had eased and producers were ready to take on new customers. That month Uniroyal took only 489,000 pounds of butadiene as opposed to an average of 3,642,000 pounds in each of the previous seven months. Uniroyal took no butadiene from December 1974 through February 1975, first saying that it needed no butadiene and then explaining that the price was too high. Uniroyal again started to purchase in March 1975 at about 19.0 cents per pound. The parties agreed to reserve their rights against each other under the contract.

THE 1970 CONTRACT

On appeal, Uniroyal argues that the adverse verdicts with respect to its claims for breach of the 1970 contract were serious miscarriages of justice. It asserts that there was not sufficient evidence to submit to the jury the question of modification or waiver of the 1970 contract. No motion for directed verdict having been made, ² the question of the sufficiency of the evidence to support the jury's verdict is not available as grounds for a motion for new trial. Southern Railway Co. v. Miller, 285 F.2d 202, 206 (6th Cir. 1960). Uniroyal further argues that since there was an absolute absence of evidence to support these verdicts, the verdicts were against the clear weight of the evidence, and the trial court's refusal to grant a new trial on each of these claims was error. We are not precluded from considering whether the trial court erred in denying Uniroyal's motion for a new trial, since motions for directed verdicts and judgments n.o.v. are not prerequisites to a motion for a new trial. United States v. Bucon Construction Company, 430 F.2d 420 (5th Cir. 1970).

In ruling upon a motion for a new trial based on the ground that the verdict is against the weight of the evidence, a district judge must compare the opposing proofs and weigh the evidence (Felton v. Spiro, 78 F. 576 (6th Cir. 1897) (Taft, J.), General American Life Ins. Co. v. Central Nat'l Bank, 136 F.2d 821 (6th Cir. 1943), and "it is the duty of the judge to set aside the verdict and grant a new trial, if he is of the opinion that the verdict is against the clear weight of the evidence * * *."

"(C)ourts are not free to reweigh the evidence and set aside the jury verdicts merely because the jury could have drawn different inferences or conclusions or because judges feel that other results are more reasonable." Tenant v. Peoria & P. U. Ry. Co., 321 U.S. 29, 35, 64 S.Ct. 409, 412, 88 L.Ed. 520 (1944); Werthan Bag Corp. v. Agnew, 202 F.2d 119, 122 (6th Cir. 1953). Thus, while the district judge has a duty to intervene in appropriate cases, the jury's verdict should be accepted if it is one which could reasonably have been reached.

With respect to the applicable scope of review of a District Court decision granting or denying a new trial on the basis of the weight of the evidence, it is well settled that reversal may be predicated only upon an abuse of discretion.

Duncan v. Duncan, 377 F.2d 49, 52-53 (6th Cir.), cert. denied, 389 U.S. 913, 88 S.Ct. 239, 19 L.Ed.2d 260 (1967) (citations omitted).

The jury heard Donald Fresne testify that some time in September 1973 El Paso advised that it was no longer going to give any reseller's consideration or commission and that effective October 1, 1973 El Paso was going to modify its type of delivery and sell material on an F.O.B. basis as opposed to a delivered basis. El Paso also advised that the government-regulated price of butadiene would be 8.25 cents per pound F.O.B. producing plant. TCP thereupon sent Uniroyal a letter stating that effective October 1, 1973 the price to it would be 0.8497 cents per pound per producing plant. The letter also contained a stock paragraph concerning prices which could be charged per the Cost of Living Council's regulations. When the price freeze was lifted in February 1974, Fresne told Wills of Uniroyal that it would be impossible for TCP to adhere to provisions set forth in the contract, "specifically escalation factors." He further testified that he "told them (Wills) that we were going to increase our prices and there would be no relationship to the increase in the escalation factors." (emphasis added). Fresne admitted that Uniroyal did not know that TCP was making increased profits since Fresne had never told Uniroyal the price it was paying El Paso.

Paul Mester, Uniroyal's Director of Purchasing, testified that he did not question the price of butadiene quoted in TCP's October 1, 1973 letter believing it reflected El Paso's...