Advanced Training Systems, Inc. v. Caswell Equipment Co., Inc.

• Decision Date: 25 May 1984
• Docket Number: No. C3-82-966,C3-82-966
• Parties: , 1984-1 Trade Cases P 66,027 ADVANCED TRAINING SYSTEMS, INC. and Edwin J. Taylor, Appellants, v. CASWELL EQUIPMENT COMPANY, INC., Theodore N. Busch, and Sente Company, Inc., Respondents.
• Court: Minnesota Supreme Court

Page 1

352 N.W.2d 1

42 A.L.R.4th 299, 1984-1 Trade Cases P 66,027

ADVANCED TRAINING SYSTEMS, INC. and Edwin J. Taylor, Appellants, v. CASWELL EQUIPMENT COMPANY, INC., Theodore N. Busch, and Sente Company, Inc., Respondents.

No. C3-82-966.

Supreme Court of Minnesota.

May 25, 1984.

Syllabus by the Court

l. The plaintiffs introduced sufficient evidence to support the jury's finding of personal libel within the time limits of the statute of limitations.

2. The plaintiffs failed to prove special damages and therefore failed to support their claim for product disparagement. A new trial is proper, submitting a single damage question for libel only.

3. Proof of special damages is not required to support claims for libel.

4. Evidence of publication by a defendant of statements demonstrating a willful disregard of plaintiff's rights is admissible without regard to the statute of limitations.

5. We find no abuse of discretion in the refusal by the trial court to grant a new trial on the ground of excessive damages.

6. Under recent standards announced by this court and the United States Supreme Court, the permanent injunction issued by the trial court is not unconstitutional.

7. The trial court did not err in dismissing the defendants' counterclaims.

Eric J. Magnuson, Mary W. Mason, Minneapolis, for appellants.

Laura S. Underkuffler, Charles A. Mays, Minneapolis, for respondents.

Heard, considered and decided by the court en banc.

SCOTT, Justice.

Plaintiffs appeal from the order of the Hennepin County District Court granting in part defendants' motions for judgment n.o.v. and a new trial. Plaintiff Advanced Training Systems, Inc. (ATS) brought suit against Caswell Equipment Company, its president Theodore Busch, and the Sente Corporation, Inc., a close corporation owned by Busch and his wife, Sente Busch. In an amended complaint plaintiffs added Edwin J. Taylor, president of ATS, individually as party plaintiff. The amended complaint alleged that defendants had libeled ATS as well as Edwin Taylor personally, and had disparaged the company's products. Plaintiffs also alleged trademark and service mark infringement, unfair competition, abuse of process, and various violations of the Uniform Deceptive Trade Practices Act, Minn.Stat. §§ 325D.43-48 (1982). By counterclaim, defendants charged plaintiffs with violations of the Deceptive Practices Act and the state antitrust laws, as well as unfair competition, trademark and service mark infringement, abuse of process and malicious prosecution. At the close of the evidence, the trial court directed a verdict for plaintiffs on all of defendants' counterclaims. The court submitted only plaintiffs' libel and disparagement claims to the jury.

The jury returned a special verdict in favor of plaintiffs. It found that defendants had libeled both plaintiffs and had disparaged their products. The jury then assessed the damages to the corporation resulting from both the libel and the disparagement in a single answer on the special verdict form, as the trial court had instructed it to do. It awarded ATS $250,000 in actual damages and $450,000 in punitive damages for both torts. The jury awarded plaintiff Taylor $75,000 in actual and $250,000 in punitive damages.

The defendants moved for judgment n.o.v. or a new trial on all issues. The court granted judgment notwithstanding the verdict on ATS' claim of product disparagement, ruling that ATS had failed to prove special damages as required for a cause of action. The court felt compelled to order a new trial on ATS' damages as a result, because the jury had erroneously been asked to assess the damages to ATS as a result of both the libel of the corporation and the disparagement of its products. A new trial was thus necessary on the issue of damages to ATS flowing from the defendants' libelous statements only. The trial court also concluded that plaintiff Taylor had failed to prove the publication of any libel within the two-year statutory period and that his claim was time-barred. The court therefore granted defendants' motion for judgment notwithstanding the verdict on Taylor's libel claim as well. Finally, the court awarded plaintiff attorney fees and a permanent injunction under the Uniform Deceptive Trade Practices Act, Minn.Stat. § 345D.45 (1982).

Advanced Training Systems and Caswell Equipment Company are competing manufacturers of firearms training equipment. Municipalities and police departments make up almost the only market for these products. The equipment is designed to train police officers to use their weapons wisely even under the extreme stress of a gun battle. The equipment selectively presents human-figure targets to the police trainee by rapidly turning the target from an edged or "hidden" position to a frontal or "exposed" one. When the target is exposed, the trainee fires. The training officer can also unpredictably present "friend" or "foe" targets that require the trainee to decide very quickly whether to fire. When a group of these targets is arranged in sequence, the training officer is able to create stress in the shooter by forcing the trainee to make that decision a number of times in rapid succession.

In 1973 Caswell Equipment Company began experiencing financial difficulties and asked its bank for a small business loan. The bankers told Caswell's principals that the company needed a professional manager in order to qualify for the loan, and called their attention to a newspaper advertisement placed by an experienced corporate manager who held an MBA degree. In the advertisement, plaintiff Edwin J. Taylor offered his services to a firm seeking to expand. Caswell hired Taylor as its chief executive officer shortly thereafter. Taylor and Caswell's principals soon became embroiled in a bitter dispute over management philosophies, and Taylor had a number of heated arguments with defendant Busch in particular. Taylor met with two key employees of Caswell during this time and discussed with them the possibility of joining him in a competing firm. The three also approached a supplier of Caswell to ask whether it would be interested in supplying such a company. In the meantime, Taylor and Busch's relationship continued to deteriorate, and Taylor left Caswell in October of 1973 after less than four months with the company. Taylor began organizing his competing firm, Advanced Training Systems, within a week. The two Caswell employees followed him a short time later.

In 1974 or 1975, defendant Busch first wrote what he called "Technical Bulletin 1217" in an attempt to persuade potential customers to buy from Caswell rather than ATS. Busch revised this bulletin slightly in 1976. The 1976 version asserted that while ATS equipment was inferior to Caswell's, it nevertheless repeatedly appeared in bid solicitations that "might otherwise have specified sound products." Caswell therefore wanted customers "to be aware of the following facts:

"1. That the ATS equipment substitutes gimmicks for needed features.

2. That it does not provide its most publicized features.

3. That the premises it is based upon are unsound."

The bulletin charged that while ATS equipment was "apparently copied from [Caswell's] concepts," it was not in the buyer's "best interest." Busch also alleged that Edwin Taylor, mentioned by name as president of Advanced Training Systems, had organized his competing firm while still an employee of Caswell. Busch distributed this document to many customers of both firms by enclosing it with his company's bids when bidding in competition with ATS.

Busch continued the attack in personal letters to customers and friends in the business. At about the time Taylor incorporated ATS, Busch stated in a letter to another firearms training manufacturer that he intended to "thoroughly neutralize" Taylor. Busch elsewhere called Taylor a "thoroughly bad egg" who was "very careless with the law," and whose company apparently thought it had a "license to steal". By letter of February 2, l976, Busch described his experience with Taylor at Caswell as follows: "Our banker convinced us that what we needed was a sharp young MBA to run the company. What we got was an unprincipled SOB." He labeled ATS's products "shoddy" in a letter to Sergeant Burns of the Los Angeles County Sheriff's Department, and said he suspected ATS and other companies of bid- or price-rigging in a letter to another prospective customer. In a letter to Butte Community College dated September 28, 1978, Busch labeled various ATS product features "nuisance[s]" that were "of no real value" or "too difficult to use."

In 1978 Busch again revised "Bulletin 1217," this time apparently on advice of counsel. Busch deleted the assertion that Taylor had organized ATS while still a Caswell employee. Also gone was the implication that bids based on ATS specifications called for equipment that was not "sound." The charges that ATS equipment was based on unsound "premises" and contained "gimmicks" in place of "needed features" were retained, but the bulletin now stated that these were Caswell's opinions rather than "facts," as the earlier version had alleged. Taylor was mentioned only as the person "now doing business as Advanced Training Systems."

In 1977, Busch published a book called "Guidelines for Police Shooting Ranges," and continued his campaign against ATS in this new forum. In the original version of this book, Busch labeled Advanced Training Systems a "fly-by-night" company. Busch explained that while such fly-by-night firms sometimes offer attractive "gimmicks," they nevertheless are "dangerous because their simplistic solutions delay responsible decisions by training officers." Busch also claimed that the founder of ATS had been an employee of Caswell "and actually started his operation while still with that company before he was discovered." By November of 1977, defendant Sente Company had distributed l69 copies of this book to various...