Roboserve, Ltd. v. Tom's Foods, Inc.

• Decision Date: 04 September 1991
• Docket Number: No. 89-8945,89-8945
• Citation: 940 F.2d 1441
• Parties: , 16 UCC Rep.Serv.2d 987 ROBOSERVE, LTD., Plaintiff-Appellee, Cross-Appellant, v. TOM'S FOODS, INC., a Delaware Corporation, Defendant-Appellant, Cross-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1441

940 F.2d 1441

20 U.S.P.Q.2d 1321, 16 UCC Rep.Serv.2d 987

ROBOSERVE, LTD., Plaintiff-Appellee, Cross-Appellant, v. TOM'S FOODS, INC., a Delaware Corporation Defendant-Appellant, Cross-Appellee.

No. 89-8945.

United States Court of Appeals, Eleventh Circuit.

Sept. 4, 1991.

Frank C. Jones, L. Joseph Loveland, Theodore B. Eichelberger, King & Spalding, Atlanta, Ga., James E. Humes, II, Hatcher, Stubbs, Land, Hollis & Rothschild, Columbus, Ga., for defendant-appellant, cross-appellee.

Robert B. Breisblatt, Jerold B. Schnayer, Welsh & Katz, Chicago, Ill., W.G. Scrantom, Jr., Mark R. Youmans, Page, Scrantom, Harris & Chapman, Columbus, Ga., for plaintiff-appellee, cross-appellant.

Appeals from the United States District Court for the Middle District of Georgia.

ON PETITION FOR REHEARING AND SUGGESTION OF REHEARING EN BANC

(931 F.2d 789 (11th Cir.1991))

Before CLARK and BIRCH, Circuit Judges, and COFFIN ^*, Senior Circuit Judge.

BIRCH, Circuit Judge:

No member of this panel nor other judge in regular active service on this court has requested that the court be polled on rehearing en banc, pursuant to Fed.R.App.P. 35 and 11th Cir. Rule 35-5. Accordingly, the suggestion of rehearing en banc is DENIED. However, the original panel hereby grants rehearing, withdraws the previous panel opinion dated May 17, 1991 and published at 931 F.2d 789, and substitutes the following opinion:

This dispute between Roboserve, Ltd. ("Roboserve") and Tom's Foods Inc. ("Tom's") involves a complex commercial relationship that began in 1981 and ended in 1987. The case was tried twice in the United States District Court for the Middle District of Georgia. After the first trial, the jury found for the plaintiff Roboserve on all counts and awarded damages of $9,500,000. The district judge granted Tom's motion for new trial because he concluded that the verdict was speculative and excessive. A second jury found for Roboserve on three of five counts and awarded $4,745,000. On appeal, Roboserve argues that the district court erroneously granted Tom's motion for new trial after the first trial as well as Tom's motion for directed verdict on the issue of punitive damages after the second trial. Tom's appeals the district court's denial, after the second trial, of its motion for judgment notwithstanding the verdict ("JNOV") or, in the alternative, for a new trial on each count that the second jury decided in favor of Roboserve. For the reasons that follow, we AFFIRM in part, REVERSE in part, and REMAND for the limited purpose of separating Roboserve's recoverable damages from those improperly awarded by the second jury on Count IV of the complaint.

I. BACKGROUND

Roboserve is a United Kingdom corporation that manufactures commercial vending machines. Tom's is based in Columbus, Georgia, and is a producer and seller of snack foods. Many of Tom's products are sold through a network of vending machines operated by its distributors, and Tom's sells those machines to distributors after purchasing them from the manufacturer.

In the late 1970's, Tom's considered adding a hot beverage program to its existing line of snack foods. Tom's specific goals for this program ultimately required an "in-cup" hot beverage machine that vended a foam cup. An "in-cup" system uses stacks of cups that are loaded into the machine with the dry ingredients (coffee, soup, hot chocolate) pre-packaged in the bottom of each cup. After the customer makes a selection, the machine releases the appropriate cup and adds hot water. Tom's wanted its system to use foam cups, instead of paper or plastic, for superior insulation; a foam cup keeps the drink hot while remaining cool to the touch. Foam cups present unique mechanical problems for an in-cup system, however, because they are easily damaged. Moreover, static electricity may cause the dry ingredients in one cup to cling to the outside of the next cup in the stack.

Tom's first met with Roboserve in 1981 because Roboserve claimed to have designed a machine that would meet Tom's requirements for its hot beverage program. Roboserve also manufactured and filled a static-free foam cup for its machine. Talks between the parties ended when they could not agree to terms for a 25-unit test of the Roboserve "Stax" machine. Two years later, the parties resumed negotiations after Tom's failed to obtain a satisfactory machine from another manufacturer. Tom's ultimately agreed to purchase 25 Stax machines from Roboserve for a market test. The purchase order was placed in January, 1984.

Tom's signed a Roboserve confidentiality agreement on May 16, 1984. The parties dispute the purpose and effect of that agreement, which was signed before Roboserve delivered the first 25 Stax machines. In the district court, Tom's contended that the agreement protected only confidential cup costing information that Roboserve produced to Tom's in May, 1984. Roboserve countered that operation and maintenance information on the Stax machines, as well as the machines themselves, were recognized as confidential and subject to the agreement.

After May of 1984, the story of this relationship is remarkably dependent upon who tells the tale, but a few facts are undisputed. The parties met and negotiated in June, September and November, 1984, and periodically thereafter. Tom's purchased 260 Stax machines from Roboserve with a purchase order dated January 3, 1985, and an additional 1000 machines with a purchase order dated February 12, 1986. After the order for 1000 machines, Tom's never purchased another Stax machine from Roboserve.

In November, 1986, Tom's sent one of its Stax machines to Polyvend, a manufacturer of vending machines based in Conway, Arkansas. Polyvend built snack machines for Tom's and had previously failed in an attempt to provide Tom's with an acceptable in-cup hot beverage system. When Tom's told Roboserve what it had done, Roboserve objected vehemently, and Tom's subsequently retrieved the machine from Polyvend. The parties met for the last time in January, 1987, and were unable to resolve their differences. In February, Tom's informed its distributors that it was no longer doing business with Roboserve. About that time, Tom's also sent another Stax machine to Polyvend so that Polyvend could "retrofit" the machine to accept non-Roboserve cups.

On May 20, 1987, Roboserve filed its complaint in this action. Four of nine counts in the complaint were dismissed before the first trial. ¹ The remaining claims included breach of contract (Count VI), breach of confidential relationship (Count II), breach of confidentiality agreement (Count III), misappropriation of trade secrets (Count IV), and promissory estoppel (Count VII). ²

The crux of Roboserve's complaint was that the parties had agreed to terms on an oral contract during meetings in June, September and November, 1984. The alleged contract would have obligated Tom's to purchase a total of 15,260 Stax machines over six years. Minimum purchase quantities were specified for each year through 1990; according to Roboserve, Tom's 260-unit and 1000-unit orders satisfied the minimum requirements for the first two years of the contract. Roboserve also claimed that Tom's was obligated to purchase all of its cup requirements for the Stax machines from Roboserve for the life of the contract, which was 20 years. Although the alleged oral contract was never formally reduced to writing, Roboserve offered several documents, including correspondence between the parties and Tom's internal memoranda, to support its contract claim.

Tom's denied, and continues to deny, that the parties agreed to an oral contract. According to Tom's, the documents offered by Roboserve to prove the existence of a contract contain "terms" that are properly characterized as projections and assumptions in connection with Tom's prolonged market test of the Stax machines. Tom's answer to Roboserve's complaint included a six-count counterclaim, but five of those counts were dismissed before the first trial. The remaining counterclaim sought $27,943.48 for an alleged overpayment on the 1000 machine order from February, 1986.

II. DISCUSSION

A. Tom's Motion For New Trial After The First Jury Verdict

At the end of the first trial, Roboserve's claims for breach of contract (Count VI), breach of confidential relationship (Count II), breach of confidentiality agreement (Count III) and misappropriation of trade secrets (Count IV) went to the jury along with Tom's counterclaim. The jury returned a $9,500,000 verdict for Roboserve on all counts, and Tom's moved for JNOV or, alternatively, for a new trial. The district court ordered a new trial, stating that it perceived the verdict to be excessive and "a matter of astonishment to all concerned." R3-135-2. Roboserve appeals that decision.

An appeal from an order granting a new trial is properly taken after entry of final judgment in the second trial. Evers v. Equifax, Inc., 650 F.2d 793, 796 (5th Cir. Unit B July 1981). We look to Georgia law to determine whether the verdict is excessive, but federal law applies to our review of the decision to order a new trial as the result of an excessive verdict. See Quality Foods, Inc. v. U.S. Fire Ins. Co., 715 F.2d 539, 542 n. 2 (11th Cir.1983).

In Georgia, "the court should not interfere with the jury's verdict unless the damages awarded ... are clearly so inadequate or so excessive as to be inconsistent with the preponderance of the evidence in the case." O.C.G.A. Sec. 51-12-12(a) (1987). The jury awarded Roboserve $5,000,000 for breach of contract (Count VI) and $1,000,000 in compensatory damages for each of Counts II, III and IV, plus $500,000 in punitive damages for breach of confidential relationship (Count II) and $1,000,000 in punitive damages for misappropriation of trade secrets (Count IV).

At the time of the alleged breach of contract in 1987, Roboserve had been selling machines to Tom's for only two years and had never sold...