Zippertubing Co. v. Teleflex Inc.

• Decision Date: 22 March 1985
• Docket Number: No. 84-5518,84-5518
• Citation: 757 F.2d 1401
• Parties: The ZIPPERTUBING CO. and Surf Chemical, Inc. v. TELEFLEX INCORPORATED and Surf Chemical, Inc. SURF CHEMICAL INCORPORATED v. TELEFLEX INCORPORATED Appeal of TELEFLEX INCORPORATED.
• Court: U.S. Court of Appeals — Third Circuit

Page 1401

757 F.2d 1401

The ZIPPERTUBING CO. and Surf Chemical, Inc. v. TELEFLEX INCORPORATED and Surf Chemical, Inc.

SURF CHEMICAL INCORPORATED v. TELEFLEX INCORPORATED

Appeal of TELEFLEX INCORPORATED.

No. 84-5518.

United States Court of Appeals Third Circuit.

Argued Feb. 5, 1985.

Decided March 22, 1985.

Gordon W. Gerber (argued), Richard R. Rulon, Robert A. Limbacher, Dechert, Price & Rhoads, Philadelphia, Pa., for appellant Teleflex Incorporated; Eugene M. Haring, Richard M. Eittreim, McCarter & English, Newark, N.J., of counsel.

Robert E. Cartwright (argued), Cartwright, Sucherman & Slobodin, Inc., San Francisco, Cal., for appellees The Zippertubing Co. and Surf Chemical, Inc.; Wm. Douglas Sellers, Sellers & Brace, Pasadena, Cal., Gregory C. Parliman, Pitney, Hardin, Kipp & Szuch, Morristown, N.J., Thomas C. Hart, Louis A. Ruprecht, McDermott, McGee & Ruprecht, Millburn, N.J., of counsel.

Before SEITZ, GIBBONS and SLOVITER, Circuit Judges.

OPINION OF THE COURT

GIBBONS, Circuit Judge:

In this diversity case Teleflex Incorporated (Teleflex) appeals from a judgment in favor of the plaintiffs, The Zippertubing Co. (Zippertubing) and Surf Chemical, Inc. (Surf) in their action for interference with a prospective advantage. The parties agree that New Jersey law governs. The case was tried to a jury, which awarded Zippertubing and Surf $2,000,000 in compensatory damages and $750,000 in punitive damages. The trial court added $345,862.96 to the award in the form of prejudgment interest which was based on the $2,000,000 compensatory damage recovery. Teleflex moved for judgment notwithstanding the verdict, or, alternatively, for a new trial. Those motions were denied, and this appeal followed. We affirm.

I. The Facts the Jury Could Have Found

Zippertubing is a designer and supplier of closeable insulation. Closeable insulation may be placed around wires and cables in place, and closed by a track closure device which holds the insulation in tubular form. Zippertubing has over the years developed several types of track closure devices. Zippertubing customarily advises its customers of the best type insulation and closure for their needs, and then has the product extruded by an outside extruder who uses Zippertubing's dies. Zippertubing does not have its own extruding facility, and has always subcontracted the actual fabrication of insulation of its design to a number of extruding houses. Solely a supplier, Zippertubing does not install the product. In the narrow field of closeable insulation Zippertubing has achieved a 90% market share.

In 1980 the New York City Transit Authority approached Zippertubing about reinsulating its R-46 subway cars. Zippertubing was not interested in contracting to install the insulation. A New York construction firm, Nab Construction, bid on the job against one other bidder, and was awarded the contract for a gross price of $10,400,000. Thereafter Nab approached Zippertubing, which was extremely interested in furnishing the insulation. Charles Mehling of Zippertubing was placed in charge of effecting the sale. After conferring with Nab and the Transit Authority, and examining the specifications for the job, Zippertubing undertook to find an extrusion house with sufficient capacity to manufacture the quantities of insulation required.

Based on a favorable recommendation from a west coast extruder, itself unable to do the job, Zippertubing approached Surf. Surf was interested in doing the extruding, but concluded that because 50,000 feet per month would be required, it could not supply the whole amount. Teleflex, a company with which Surf had dealt on a prior occasion, had an extruding plant nearby in New Jersey. Surf approached Teleflex, which gave Surf an oral quotation for the extruding. Surf in turn gave an oral quotation to Zippertubing. Zippertubing then advised Nab that it could supply the insulation for $4.90 per foot on average for the five sizes of closeable insulation required.

Nab was satisfied with the quotation, and requested Zippertubing to firm up the matter in writing. On February 4, 1981 Zippertubing sent Nab a draft contract, together with exemplars of the different types of track closing devices which it could furnish. On February 9, 1981 representatives of Nab visited Zippertubing's Los Angeles office. They reviewed the draft contract and arrived at a meeting of the minds on almost all particulars. Mr. Simpson of Nab, aware that Zippertubing did not perform the extruding, expressed the desire, before signing the contract, to inspect the facility which would actually fabricate the material, in order to satisfy himself that the extruder had the ability to produce. Zippertubing advised Simpson about Surf's facility, and that it would arrange for an inspection as soon as possible. Nab and Zippertubing discussed the relative merits of a "hook lock" and an "arrow lock" closing device, both of which were Zippertubing designs, and either of which could be supplied. A revised Nab-Zippertubing contract was prepared, and signed on behalf of Zippertubing the same day. Zippertubing also prepared a purchase order to Surf for the extruding, and drew a $10,000 check to Surf's order as a down payment. Mehling of Zippertubing made an appointment to meet with Surf at its New Jersey plant on Wednesday February 11, 1981, and on Tuesday night flew to New Jersey. Meanwhile on February 10, Teleflex issued Surf a quotation "firm for 30 days" for the extrusions, in which Teleflex agreed "to hold these prices for a period of 12 months, based on a blanket order for entire quantity." App. 2738.

On February 11, Mehling was advised that Surf felt it did not have the capacity to turn out the product fast enough, and had accordingly secured a quotation from Teleflex for the extruding. Mehling informed Surf that Nab's inspection of the extruding facility was the sole step remaining for consummation of the agreement. Surf called Teleflex, advising that its customer desired to meet with Teleflex. Messrs. Whitney and Brunner of Surf and Mehling of Zippertubing then went to the nearby Teleflex plant. There they met with Michael Perrera, General Manager, Thomas Hardiman, National Sales Manager, and three other Teleflex executives. Mehling was assured that Teleflex was willing and able to do the extruding for the job at the quoted price and in the required quantities. He then advised that the customer desired to inspect the extrusion facility to satisfy itself of the plant's capacity. Teleflex agreed, and scheduled the inspection for the following morning at 10:00 a.m. Believing that Teleflex had agreed to perform the extrusions for Surf and Zippertubing, Mehling, for the first time, revealed that Nab Construction Company was the customer, and that the insulation was destined for the New York City Transit Authority. The meeting was adjourned, and Mehling called Simpson of Nab to arrange for the scheduled inspection on the next morning.

After Mehling and the Surf representatives left the Teleflex plant, Thomas Coneys, a Teleflex vice-president, and Mr. Perrera, agreed to by-pass Zippertubing and Surf. Coneys called Simpson. He told Simpson that Teleflex had an unannounced visit from Zippertubing and Surf; that he was informed about the proposed meeting on the following day; and that Simpson could visit the plant, but because Zippertubing and Surf were competitors of Teleflex, he could not permit them to visit. In fact the visit was not unannounced and Teleflex was not a competitor of Zippertubing and Surf in the closeable insulator business. It had never manufactured closeable insulation. Coneys invited Simpson to come at the appointed time. He then instructed Mr. Hardiman to call Surf and advise that the scheduled meeting was "off" because Teleflex was having "second thoughts." Hardiman was not informed that the Simpson meeting was "on." Hardiman made the call to Surf, and at 4:45 that afternoon Surf informed Mehling.

Mehling called Simpson to advise him that the meeting was "off", but Simpson told Mehling about the conversation with Coneys. Simpson and Mehling agreed that Simpson should go to the Teleflex plant at the appointed time to satisfy himself as to Teleflex's capability to make the extrusions, and that Mehling should endeavor to get the transaction between Zippertubing and Surf and Teleflex back on track. Mehling and Brunner called Mr. Hardiman to arrange for another meeting with Surf and Zippertubing, and such a meeting was scheduled for 4:00 p.m. on February 12.

On that date Simpson kept the 10:00 a.m. appointment with Coneys and Perrera. Hardiman, who was scheduled to meet that afternoon with Mehling, was not told of the meeting with Simpson. After inspecting the facility, Simpson concluded that Teleflex was able to do the extruding. He was informed, however, that Teleflex would only deal directly with Nab. Simpson regarded Teleflex as a subcontractor to its supplier, Zippertubing, and would not normally have dealt directly with a subcontractor, but by then Nab had been awarded the Transit Authority contract and was subject to severe penalties if it did not perform. When the subject of Simpson's concern for by-passing Zippertubing came up, Coneys suggested that Teleflex would take care of Zippertubing with a finder's fee. No such fee was ever offered.

After the meeting with Coneys and Perrera, Simpson called Mehling and told him that Teleflex would now deal only directly with Nab. Simpson also related Coneys' assurances, precipitated by Simpson's distress about cutting Zippertubing out of the deal, that Teleflex would take care of Zippertubing.

Hardiman met with Mehling and the Surf representatives at 4:00 p.m. With a serious and grim demeanor, Hardiman gave what appeared to be a memorized statement as to why Teleflex would not deal with them. When pressed for particulars he mentioned the risk of doing business in New York, the risk in the design which they were asked to...