Universal Power Systems, Inc. v. Godfather's Pizza, Inc.
| Decision Date | 19 June 1987 |
| Docket Number | Nos. 86-1972,86-2032,s. 86-1972 |
| Citation | 818 F.2d 667 |
| Parties | 3 UCC Rep.Serv.2d 1748 UNIVERSAL POWER SYSTEMS, INC., Appellee, v. GODFATHER'S PIZZA, INC., Appellant. (Two Cases) UNIVERSAL POWER SYSTEMS, INC., Appellant, v. GODFATHER'S PIZZA, INC., Appellee. (Two Cases) |
| Court | U.S. Court of Appeals — Eighth Circuit |
Jeffrey Shaw, St. Paul, Minn., for appellant.
John Lewis, Springfield, Mo., for appellee.
Before ROSS, BOWMAN, and MAGILL, Circuit Judges.
Godfather's Pizza, Inc. ("Godfather's") appeals from a final judgment entered by the district court upon a jury verdict in favor of Universal Power Systems, Inc. ("Universal") on a pizza pan oral "requirements" contract. For reversal, Godfather's argues that the district court erred in (1) finding that a contract existed as a matter of law, (2) admitting and excluding certain evidence, and (3) holding that the jury's award of damages was supported by the evidence. Universal cross-appeals from the district court's denial of its claim for pre-judgment interest. For the reasons discussed below, we affirm on the issues of contractual liability and pre-judgment interest, and remand the case for a new trial solely on the issue of damages, unless Universal consents to a remittitur.
Godfather's is a Nebraska corporation, whose principal business is the operation of pizza restaurants through a franchise system. Universal is a Missouri sales corporation engaged in the business of supplying pizza pans and accessories to various pizza companies such as Pizza Hut, Domino's Pizza and Godfather's.
Before 1983, Godfather's sold only one type of pizza--original "thin crust" pizza. From 1980 to 1983, Universal was the sole supplier of Godfather's original thin crust pizza pans, based on an oral agreement.
In early 1983, Godfather's employed a consulting firm to study the feasibility of expanding its product line to include "deep dish" pizza. Universal learned of the study, and discussed with the consulting firm and Godfather's its willingness to participate in the project.
On July 6, 1983, Godfather's contacted Universal at its Springfield, Missouri office and requested a meeting in Omaha, Nebraska to be held the next day.
The meeting of July 7, 1983, lies at the heart of this dispute. Plaintiff's characterization of the meeting is as follows: The meeting was held in a conference room at defendant's corporate offices in Omaha. Bob Theisen, Tony Taylor and Mike DuChateau were present for Godfather's. At this time, Bob Theisen was Godfather's executive in charge of procuring pizza pans. Mr. Douglas Power and Mr. Gene Rutledge were present for plaintiff. The parties discussed the details of a possible "national rollout" of deep dish pizza. The logistics of such an undertaking were discussed including prices, quantities, and the development of acceptable dies for the manufacture of pans. It appeared that Godfather's needed three items which Universal Power could supply: (1) the pizza pan itself; (2) a collar, which fits around the top edge of each pizza pan and facilitates the cooking of the dough during the precooking stage; and (3) a separator, which allows the pans to be stacked one on top of the other. After a lengthy discussion Bob Theisen stated that Willy Theisen, the president of the company, had asked if Universal Power would be able to supply their needs. Mr. Power and Mr. Rutledge responded affirmatively. At that point, Mr. Theisen sat back in his chair and stated, "We need not go any further, we've found our supplier." Mr. Power and Mr. Rutledge stated that it was agreed at the meeting that Universal Power would supply all pans for the test markets. After testing, Godfather's would make a decision as to whether or not deep dish pizza would be incorporated into all the stores in the Godfather's chain. If so, plaintiff would supply the pans. However, both parties understood that Godfather's could not force its independent franchisees to purchase pans from the plaintiff. Accordingly, the contract was contingent upon two factors: (1) final approval of the deep dish pizza concept; and (2) acceptance of plaintiff's wares by the noncompany owned stores. [At this time, Godfather's had approximately 660 restaurants, one-third of which were company stores and two-thirds of which were owned and operated by independent franchisees.]
Defendant's version of the meeting is essentially the same with respect to many of the details. However, Bob Theisen contended that the agreement reached at the July 7 meeting was only that Universal Power would supply pans for the test markets and not that Universal Power would supply all of defendant's requirements of pans.
Universal Power Systems, Inc. v. Godfather's Pizza, Inc., Nos. 84-3248, 3249-CV-S-4, slip op. at 3-4 (W.D.Mo. July 16, 1986) (unpublished opinion).
After the meeting, Universal began to develop the tool and die work for production of the deep dish pans. Because of financing needs, Power asked Godfather's to send him a letter setting forth the parties' intentions so he could have something in writing to present to a bank loan officer. Bob Theisen wrote the letter, dated July 14, 1983, which was admitted into evidence at trial and which provides in relevant part:
Dear Doug [Power],
This letter is to confirm Godfather's Pizza, Inc.'s intention to purchase the following products:
1. Godfather's pizza dish--14 inch
2. Godfather's pizza dish--12 inch
3. Godfather's pizza dish--10 inch
We are also looking at prototype samples of spatulas and service trays submitted by Universal Power Systems, Inc.
Godfather's Pizza plans to use the pizza dishes in all company units providing the concept of pan pizza reaches final approval. Additionally, price competitiveness and consumer acceptability will be monitored. The above products can be made available for purchase by all franchise holders of Godfather's Pizza.
Sincerely,
Franchise Services Subsequently, there was a change in ownership and operation at Godfather's; on August 10, 1983, Godfather's purchased Hockenbergs, Inc., a restaurant supply corporation, and on September 6, 1983, Diversified Foods, Inc., a Pillsbury Company subsidiary, purchased Godfather's and instituted new management therein. This new management developed a new policy regarding purchases of pans and supplies, which required manufacturers to deliver their pans to Hockenbergs rather than to the franchisees. The new system also required competitive bids on contracts to supply Godfather's.
Universal was informed of the above changes sometime in October of 1983. By that time, Universal had already supplied 30 to 35 stores with its new equipment, and had received an order to supply 75 stores in the test market--35 stores by November 15, 1983, and 40 stores by December 15, 1983. Also around this time, Bob Theisen told Universal representatives that the new owners wanted bids on the pans, collars and separators. According to Universal, however, Theisen stated that it was just a formality. No bid forms were sent to Universal, and Universal did not submit any bids.
On November 9, Thomas Schrack, Hockenbergs' president, called Universal and told it that the contract for the national roll out of deep dish pizza pans had been awarded to Chicago Metallic Products. Godfather's issued a purchase order, dated November 8, 1983, to Chicago Metallic for $1,675,626.48 worth of goods for the national rollout.
By letter dated November 11, 1983, Universal informed Godfather's that it objected to the Chicago Metallic contract based on the agreement reached at the July 7, 1983 meeting in Omaha. Universal also stated that it would continue to supply the 75 test stores, which it did, but that it had not waived any rights under its contract with Godfather's. Although Universal did not sell any more deep dish supplies to Godfather's, it did sell approximately $400,000 worth of the pans, collars, and separators to independent franchisees.
Subsequently, Godfather's was unable to complete its contract with Chicago Metallic, and only $911,927.35 worth of pans, collars and separators were actually delivered and paid for under the contract. Nevertheless, Godfather's paid Chicago Metallic an additional $411,816.65, in settlement of an apparent breach of contract claim.
Universal subsequently filed this diversity breach of contract action in federal district court, seeking lost profit damages in the amount of $579,000 based on a 31.4% "direct" profit percentage of Chicago Metallic's $1.6 million purchase order. It theorized that the order represented Godfather's requirements for the national rollout, and had Godfather's not breached its contract with Universal, Universal would have gotten the order. Universal also sought pre-judgment interest.
Following a three-day trial, the jury returned a verdict in favor of Universal, awarding it $400,000 in damages. After trial, the district court ruled on and denied Universal's motion for pre-judgment interest. The court also denied Godfather's alternative motions for j.n.o.v., a new trial, or a remittitur of damages. This appeal followed.
Godfather's concedes that requirements contracts are valid and enforceable under Missouri law, see Mo.Ann.Stat. Sec. 400.2-306(1) (Vernon 1965), the governing law in this diversity case. Godfather's claims, however, that the alleged oral requirements contract was so lacking in its material terms that the court should have deemed the contract invalid for indefiniteness as a matter of law and granted its motion for judgment notwithstanding the verdict. Additionally, Godfather's notes that the July 14, 1983 letter allegedly memorializing the contract did not state that Universal was to be its exclusive supplier, but merely represented Godfather's "intention" to use Universal as "a"...
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