Robertson Oil Co., Inc. v. Phillips Petroleum Co.

• Decision Date: 29 June 1989
• Docket Number: No. 88-1266,88-1266
• Citation: 871 F.2d 1368
• Parties: ROBERTSON OIL COMPANY, INC., Appellee, v. PHILLIPS PETROLEUM COMPANY, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1368

871 F.2d 1368

ROBERTSON OIL COMPANY, INC., Appellee, v. PHILLIPS PETROLEUM COMPANY, Appellant.

No. 88-1266.

United States Court of Appeals,

Eighth Circuit.

Submitted Sept. 15, 1988.

Decided March 31, 1989.

As Amended on Denial of Rehearing and Rehearing En Banc June 29, 1989.

William H. Sutton, Little Rock, Ark., for appellant.

Julius Glickman, Houston, Tex., for appellee.

Before JOHN R. GIBSON, Circuit Judge, and BRIGHT and HENLEY, Senior Circuit Judges.

JOHN R. GIBSON, Circuit Judge.

Phillips Petroleum Company appeals from a verdict against it which awarded Robertson Oil Company $750,000 in actual damages and $5,000,000 in punitive damages. The jury in this diversity action found that Phillips was liable for fraud, breach of its duty of good faith and fair dealing, tortious interference with the relationship between Robertson and its client, Spe-Dee Mart, and negligence. The jury failed to agree on whether Phillips had breached an oral contract, and on this issue a mistrial was declared. The district court on post-trial motions entered a judgment notwithstanding the verdict on the breach of the duty of good faith and fair dealing theory. For reversal Phillips argues principally that the evidence was insufficient to support a verdict of fraud and tortious interference, that as a matter of law Phillips was not negligent nor did it breach an oral contract, and that the verdicts were inconsistent. Phillips also contests the general verdict on compensatory and punitive damages and attacks the constitutionality of the punitive damage award. We affirm the district court's rulings that there were submissible claims of fraud, tortious interference with the relationship between Robertson and Spe-Dee Mart, and negligence. We conclude, however, that both the inconsistencies between the findings of negligence and fraud, and the judgment notwithstanding the verdict on the breach of duty of good faith and fair dealing theory, undermine the basis for the jury's punitive damage award, and we must remand these issues for retrial. As the tortious interference claim supports the actual damages, we affirm the award of actual damages.

I.

Robertson Oil, solely owned and managed by Butch Robertson, is an independent distributor or jobber of petroleum products in the area of Fayetteville, Arkansas. For seven years, Robertson sold gasoline to twenty-three Spe-Dee Mart outlets, which accounted for 65% of Robertson's total business. Phillips' gas is marketed by jobbers on a branded and unbranded basis. Gas is considered branded if the Phillips trademark and logo are exhibited, and unbranded if the outlet, such as Spe-Dee Mart, displays its own logo. During the seven-year period, Spe-Dee Mart bought approximately 99% of its gas through Robertson, all of which was unbranded. In May of 1984 Spe-Dee Mart asked Robertson to convert all twenty-three Spe-Dee Mart stores from unbranded to branded Phillips outlets. Robertson immediately telephoned Jerome Lewis, the regional sales manager for Phillips, and told him of Spe-Dee Mart's desire to be branded by Phillips. Robertson testified that Lewis, who admittedly had the final authority to approve the requested branding of Spe-Dee Mart, answered: "There will be no problem with it. If it meets our image standards, we'll do it." Robertson testified that Lewis went on to say that Robertson should submit a letter through normal channels and "when it got to him he would approve it." (Tr., Vol. 1, 42, 54, 112). Robertson then sent a letter regarding the branding to Dave Howard, the Phillips marketing representative, as is consistent with formal operating procedures.

Robertson testified that he spoke with Lewis by telephone on several occasions during the months of June through August, 1984, and that on each occasion Lewis assured Robertson that all twenty-three of the Spe-Dee Mart stores would be branded by Phillips. Robertson summarized Lewis's response in the several calls by testifying that when Lewis was asked about branding, he stated: "Don't worry about it, it's taken care of," and "It's no problem." (Tr. Vol. 1, 54). Robertson testified that at a Memorial Day golf outing arranged by Robertson in Tulsa, Oklahoma, he asked Lewis about the status of his proposal and Lewis said "it was in the mill" and he would "be over in October and take care of it." (Tr. Vol. 1, 57). Neither Lewis, Howard, nor Bob Likens, also an agent of Phillips, disclosed to Robertson at this time that they were privately discussing among themselves their reservations on the branding deal. Although Howard prepared a proposed memo to be sent to Robertson revealing Phillips' intentions concerning the branding agreement, Howard testified that he never sent it.

Robertson then scheduled a meeting for October, 1984 in Fayetteville between Robertson, Spe-Dee Mart, and Phillips, to formally close the agreement to brand the Spe-Dee Mart stores. The day before the meeting, Lewis informed Robertson that only three of the twenty-three Spe-Dee Mart stores could be branded because they were giving John Johnson, the Phillips jobber in Springdale, Arkansas, six months to exclusively develop the Rogers territory.

The next day Lewis, Likens, and Howard attended the scheduled meeting with Robertson and Spe-Dee Mart's owners, Hoyet and Stanley Greenwood. There, Lewis told the Greenwoods that Phillips was not going to brand all of their stores, but only three. Likens testified that Lewis then informed the Greenwoods that "they would take a look down the road again to see if * * * [they] were happy, if there had been any improvements in Butch's performance, and if Greenwood performed, then * * * [they] would consider others at a later date." (Tr. Vol. 3, 110). The Greenwoods reached the conclusion during this meeting that Phillips "had a problem" with Robertson and that he was "probably insolvent" because they could think of no other reason why Phillips would not brand all of the Spe-Dee Mart stores. (Tr. Vol. 2, 2). Greenwood also testified that he felt Phillips did not want their business. After the meeting, the Greenwoods began to search for another refiner with whom to brand. Although Robertson later offered to brand Spe-Dee Mart through Conoco in January, 1985, the Greenwoods declined Robertson's offer.

After the October meeting John Johnson, according to Stanley Greenwood, solicited the Spe-Dee Mart business. Greenwood, however, declined the offer and informed him that they would continue business with Robertson. Hoyet Greenwood testified that a Phillips representative later contacted him and offered to brand the Spe-Dee Mart outlets, but that Spe-Dee Mart had already reached a branding agreement with Unocal. Following Spe-Dee Mart's branding with Unocal, Robertson lost all present and expected Spe-Dee Mart business, which had accounted for approximately sixty-five percent of his revenues.

These several conversations between Robertson and Phillips employees led Robertson to file a multi-count claim against Phillips, alleging breach of an express oral and written contract, breach of the duty of good faith and fair dealing, tortious interference with a business relationship or expectancy, breach of fiduciary duty, actual fraud, constructive fraud, negligent misrepresentation, conspiracy, prima facie tort and negligence. At the close of Robertson's case, the district court granted Phillips' motions for directed verdict on the theories of breach of written contract, breach of fiduciary duty, negligent misrepresentation, prima facie tort and conspiracy. At the close of all the evidence, the district court denied Phillips' motions for directed verdicts on each of the remaining theories, including Robertson's prayer for punitive damages.

The district court then submitted the case to the jury. In answers to special interrogatories, the jury could not agree on whether Phillips had made an oral promise to Robertson, and the district court declared a mistrial on that issue. The jury found Phillips liable for fraud, breach of the duty of good faith and fair dealing, tortious interference and negligence. It determined that Phillips was seventy percent responsible and Robertson Oil thirty percent responsible for the occurrence and any damages resulting from it, and returned a verdict of $750,000 in compensatory damages and $5,000,000 in punitive damages against Phillips. Final judgment was entered against Phillips in accordance with the compensatory and punitive damages awards of the jury.

Phillips then moved for a directed verdict on the oral contract theory on which the district court had declared a mistrial, and motions for judgment notwithstanding the verdict or for a new trial on the issues of fraud, tortious interference, breach of the duty of good faith and fair dealing and negligence. The district court granted judgment notwithstanding the verdict in Phillips' favor on the breach of the duty of good faith and fair dealing theory, but rejected Phillips' request for relief on the remaining counts. Phillips now appeals each adverse decision of the district court.

II.

Phillips first argues that the district court erred in denying its motion for judgment notwithstanding the verdict on the fraud theory. We have had frequent occasions to state our standard of review of the submissibility of a case. We may find for Phillips only if:

"all of the evidence points one way and is susceptible of no reasonable inferences sustaining the position" of [Robertson]. Furthermore, we must resolve direct factual conflicts in favor of [Robertson], assume as true all facts in [its] favor which the evidence tends to prove, and give [it] the benefit of all reasonable inferences. We may not find for [Phillips] if the evidence so viewed would "allow reasonable jurors to differ as to the conclusions that could be drawn."

Craft v. Metromedia, Inc., 766 F.2d 1205, 1218 (8th Cir.1985) (citations omitted); cf. Loudermill v. Dow Chem. Co., 863 F.2d...