American Business Interiors, Inc. v. Haworth, Inc.

• Decision Date: 12 August 1986
• Docket Number: No. 85-2071,85-2071
• Parties: AMERICAN BUSINESS INTERIORS, INC., Appellee, v. HAWORTH, INC., Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1135

798 F.2d 1135

AMERICAN BUSINESS INTERIORS, INC., Appellee, v. HAWORTH, INC., Appellant.

No. 85-2071.

United States Court of Appeals,

Eighth Circuit.

Argued April 17, 1986.

Decided Aug. 12, 1986.

Lawrence W. Bigus, Kansas City, Mo., for appellant.

J. Michael Cronan, Kansas City, Mo., for appellee.

Before LAY, Chief Judge, McMILLIAN,

Circuit Judge, and ROSENN, ^* Senior Circuit Judge.

ROSENN, Senior Circuit Judge.

This appeal raises an interesting question concerning ethics and impermissible conduct in the marketplace: what duties, if any, does a manufacturer owe its authorized dealer after it has notified the dealer that their relationship is terminated but before the termination is to take effect? Haworth, Inc., with headquarters in Holland, Michigan, manufactures office furniture, marketing it through direct sales and authorized dealers. American Business Interiors, Inc. (ABI), formerly an authorized dealer in Kansas City, Missouri, of Haworth furniture, asserts that Haworth prevented it from submitting a winning competitive bid to one of its major customers by refusing to provide requested pricing information ordinarily available to Haworth dealers.

ABI argues that the refusal to provide requested information tortiously interfered with its business expectancy from the bid, breached a contract, and violated Missouri's franchise statute. Prior to ABI's request for the pricing information, Haworth had notified it that the dealership was terminated, but the termination had not yet taken effect. A jury awarded ABI nominal actual damages of $1 for each of its three claims and $250,000 punitive damages for the tortious interference claim. The United States District Court ¹ for the Western District of Missouri denied Haworth's motion for a new trial and entered judgment on the verdict. Haworth appeals, arguing inter alia that it owed no duty to supply ABI with the pricing information. We conclude that the district court correctly applied the law of Missouri ² and affirm.

I.

Haworth selected ABI as an authorized systems office furniture dealer in 1973, sending it a fifteen-page manual entitled "Unigroup Dealer Polices." The manual stated that Haworth dealers "have undergone a very selective process" and listed specific qualifications dealers possessed. The manual obligated ABI to complete a detailed questionnaire, send all its sales employees to two-day training seminars, and use various Haworth promotional services. As a Haworth dealer, ABI was entitled to standard dealer discounts and in some circumstances to special terms. Sales to dealers not authorized by Haworth, described in the manual as "non-franchise dealers," were discouraged and permitted only through Haworth's regional offices. The manual provided that authorized dealerships could be terminated for stated causes, including poor performance, on 90 days notice by certified letter. Despite the obligations that the manual appears to impose on Haworth and ABI, neither party contends that it constitutes a contract.

Haworth permitted ABI as an authorized dealer to use the trademark Unigroup and the registered service marks ERA-1 and Haworth. It also authorized and partly paid for Yellow Page advertising in the Kansas City telephone directory listing ABI as one of three authorized Haworth dealers in Kansas City, Missouri.

Prior to becoming a Haworth dealer and through the period covered by this litigation, ABI had a business relationship with Johnson County Community College (JCCC) pursuant to which ABI sold JCCC furniture and office equipment in over 80 transactions. ABI had introduced Haworth products to JCCC in 1975. The college's facilities director, Gene Haun, testified that he respected ABI's president, Harold Caplan, and relied on his judgment in selecting furniture. As early as 1980 Caplan and Haun discussed using Haworth products in a project JCCC let for bid in January 1982. Several times before December 1981 Haun spoke further with Caplan and ABI sales personnel about the project, and at least once visited the ABI showroom to view Haworth products.

Haworth contends that it was dissatisfied with ABI's handling of its products since 1979, that it met with ABI in July 1981 and attempted to meet with ABI later to discuss termination, and that after an unsatisfactory October meeting, it decided to terminate ABI as a Haworth dealer. Haworth was disturbed particularly by a new budget image ABI had adopted, which it felt was inconsistent with the tone of other authorized dealers. In a letter dated December 1, 1981, Haworth notified ABI that because its sales volume was lower than Haworth had anticipated, "[e]ffective March 3, 1982, the Unigroup line will no longer be sold through [ABI]. Should you have any jobs pending, we will, of course, honor those orders if placed prior to the termination date."

On January 26, 1982, JCCC invited bids on the project it had previously discussed with ABI. The bids were due on February 12, and were to be kept open until March 24. ABI informed Haworth in a letter dated February 1, 1982, that it intended to bid on the JCCC job and requested information from Haworth about special discounts and other price information. Haworth evaded several telephone calls from ABI before replying. In a letter dated February 11, 1982, Haworth notified ABI that because it had been terminated, Haworth would not provide any information to aid ABI in winning the JCCC job or support or assist it on other new business that may have been initiated after Haworth's termination letter of December 1, 1981. James O'Dowd, a sales representative from Haworth's regional office, informed Haun sometime before bids were submitted that after ABI was terminated as an authorized dealer on March 3, it would not be able to service Haworth products. ABI did not submit a bid.

ABI produced evidence that Haworth, contrary to its stated and usual practice, had discussed possible bids and profit margins with two other dealers interested in the JCCC job. O'Dowd apparently advised Schooley, Inc., a newly authorized dealer of Haworth products, to raise its bid to allow a higher profit margin. He then advised Rainen Business Interiors, the third authorized Haworth dealer in Kansas City, what percentage off list price would win the JCCC job. This suggested price was lower than what Schooley was advised to submit. O'Dowd's brother-in-law worked for Rainen and they gave him the JCCC account when Rainen's bid was ultimately accepted.

Using the information Haworth had given Schooley and Rainen about available discounts and ABI's documented prior pricing practices, ABI produced an estimated bid at trial that would have been lower than its Haworth competitors and which would have provided a total profit of around $21,000. Haworth questions whether the bid would have been accepted, because following Haworth's termination letter of December 1, ABI could not keep the bid open as required until March 14 and because it had inadequate credit. The invitation to bid provided that JCCC could waive any irregularities in bids, however, and Haun testified that ABI's bid probably would have been considered if it could have been kept open for a week after JCCC's board met to choose the winning bidder for the project. The board met February 17, and ABI's termination as a dealer did not take effect until March 3, more than a week later.

ABI expended some effort in preparing to submit a JCCC bid. It submitted evidence showing that four ABI employees made a sales presentation to Haun, an employee spent two to four hours sketching the bid and making list price calculations on nearly all the 86 bid items, ABI sought information about subcontracting wiring work, and ABI sought the price information from Haworth. These efforts were concentrated in the few days preceding Haworth's refusal to provide information and there is no evidence that ABI bypassed or jeopardized other business opportunities by attempting to prepare the JCCC bid.

The jury found for ABI on its claims for tortious interference, violation of the franchise statute, and breach of contract, awarding $1 nominal actual damages on each claim and $250,000 punitive damages on the tortious interference claim.

II.

Haworth appeals on numerous grounds, many of which the district court considered and rejected in denying Haworth's motions for summary judgment, directed verdict, judgment notwithstanding the verdict (NOV), and a new trial. Haworth makes no effort to distinguish the various bases for the relief it seeks or the relative importance of the issues it presents.

The district court instructed the jury that it could only award punitive damages in connection with ABI's tortious interference claim, and Haworth does not contend that the court's charges on breach of contract and violation of the franchise statute prejudiced the jury and resulted in the punitive damage award. Therefore, ABI's contract and franchise claims are important to the parties only insofar as they bolster the tortious interference claim. Even if this court agrees with Haworth that the jury should not have been charged on the contract and franchise claims, the punitive damage award might stand and the judgment against Haworth be reduced by only two dollars.

In accordance with this circuit's general practice, we view the district court's rulings on the law of the state in which it sits with substantial deference, rejecting its interpretations only when they are fundamentally deficient in analysis or otherwise lacking in reasoned authority. Dabney v. Montgomery Ward & Co., Inc., 761 F.2d 494, 499 (8th Cir.), cert. denied, --- U.S. ----, 106 S.Ct. 233, 88 L.Ed.2d 232 (1985). In reviewing the district court's denial of Haworth's motions for a directed verdict and--judgment NOV, we view the evidence, together with all reasonable inferences to be drawn therefrom, in the light most favorable to ABI, the non-moving party. SCNO Barge Lines, Inc. v....