American Hot Rod Ass'n, Inc. v. Carrier

• Decision Date: 17 July 1974
• Docket Number: Nos. 73-1964,73-1965,s. 73-1964
• Citation: 500 F.2d 1269
• Parties: AMERICAN HOT ROD ASSOCIATION, INC., Appellee, v. Robert L. CARRIER, Appellant. AMERICAN HOT ROD ASSOCIATION, INC., Appellant, v. W. R. LAND, Jr., et al., Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 1269

500 F.2d 1269

AMERICAN HOT ROD ASSOCIATION, INC., Appellee, v. Robert L. CARRIER, Appellant.

AMERICAN HOT ROD ASSOCIATION, INC., Appellant, v. W. R. LAND, Jr., et al., Appellees.

Nos. 73-1964, 73-1965.

United States Court of Appeals, Fourth Circuit.

Argued Jan. 9, 1974.

Decided July 17, 1974.

Lloyd S. Hellman, Kansas City, Mo. (Keith E. Witten, Achtenberg, Sandler & Balkin, Kansas City, Mo., Louis A. Bledsoe, Jr., Berry, Bledsoe & Hogewood, Charlotte, N.C., on brief), for appellant in No. 73-1965 and for appellees in No. 73-1964.

Richard M. Hutson, II, Durham, N.C. (Hofler, Mount, White & Long, Durham, N.C., Hugh A. Lee, Webb, Lee, Davis & Gibson, Rockingham, N.C., on brief), for appellees in No. 73-1965.

Seawell, Pollock, Fullenwider, Van-camp & Robbins, P.A., Southern Pines, N.C. (Gore, Ladd & Gillenwater, Bristol, Tenn., on brief), for appellant in No. 73-1964.

Before HAYNSWORTH, Chief Judge, and WINTER and WIDENER, Circuit judges.

WIDENER, Circuit Judge:

This multi-count diversity case arises out of the alleged breach of a contract involving the sanctioning and promotion of major drag races at Rockingham, North Carolina.

The American Hot Rod Association, Inc. (AHRA) brought this suit against W. R. Land, Jr., L. G. DeWitt, Jerry L. Goodwin, Franklin McKay, and J. M. Long, doing business as the Rockingham International Dragway (Land, et al); the Rockingham International Dragway, Inc. (Rockingham); Robert L. Carrier; and the International Hot Rod Association (IHRA). Count I of the complaint alleged breach by the defendants, Land, et al, and Rockingham, of a written contract of October 5, 1968 giving AHRA certain sanctioning privileges over a period of five years at the Rockingham International Dragway. Count II claimed that Carrier and the IHRA had tortiously interfered with the October 5, 1968 Rockingham contract, and also that Carrier had breached its fiduciary duty as an agent of AHRA. Count III, alleging a conspiracy to breach the contract, was dismissed by AHRA. And Count IV, against Carrier solely, alleged breach of a written non-competition agreement given by Carrier in favor of AHRA.

These issues were tried before a jury which, on May 24, 1973, found by special verdict in favor of the defendants and against AHRA on Counts I and II. AHRA, in No. 73-1965, appeals both Counts. As to Count IV, the jury returned a special verdict in favor of AHRA and against Carrier in the amount of $100,000. Carrier, in No. 73-1964, appeals this judgment. We find no error in No. 73-1965 and affirm. But, in No. 73-1964, we reverse and remand with instructions.

I.

AHRA is a Missouri corporation engaged in the business of sanctioning and co-promoting drag races. The organization serves to provide a pool for the purchase of spectator liability and racers' insurance; to formulate a standard set of rules regarding the construction of cars; to approve times and records set; and to use its name and reputation in sanctioning certain major races. AHRA also solicits participation by well-known drivers and advertises races in return for a portion of the net proceeds.

The defendant, Robert L. Carrier, is a Tennessee resident who has been involved in various aspects of the business of racing since 1960. As part owner of the Bristol International Speedway, he has constructed and operated a round track since 1961, and a drag track since 1965. Carrier has considerable experience in handling promotions, including advertising, of drag racing events.

James M. Tice, the President of AHRA, first met Carrier in 1964. In 1968, AHRA began sanctioning and copromoting drag racing events at Carrier's Bristol track. At approximately the same time, Tice appointed Carrier an honorary vice-president with AHRA in charge of sanctioning drag racing in the southeastern United States. For these services, Carrier was paid no salary.

In 1968, Carrier met with a group of investors, including Land and others, who wanted to develop a drag racing strip near Rockingham, North Carolina. None of the investors were experienced in the operation or promotion of major drag racing events. Carrier negotiated a contract, however, involving as separate parties AHRA, Carrier, and the investors, which was signed on October 5, 1968. Under this agreement, two drag racing events were to be held annually for a period of five years at Rockingham. AHRA, on the one hand, and Land and the other investors, on the other, were to share equally in the net profits (as defined by the contract) or losses of each race.

Land and the other investors were responsible for the entire financial investment in the construction of the race track, which included the drag strip, spectator stands, and buildings. AHRA's duties were to sponsor, sanction, and promote two major races annually at the new track. Carrier, who signed the contract in an individual capacity as a third party, was given additional responsibilities, as noted in Item 2 of the Agreement.

'The Dragway agrees that Larry Carrier is retained in an advisory capacity to the Dragway, and shall be continually retained by the corporation, Rockingham International Dragway, Incorporated, under the assignment of this contract, in an advisory capacity, both in the construction of Rockingham international Dragway and in the operation of the Rockingham International Dragway . . ..'

Carrier was to receive $5,000, plus expenses, from the gross receipts of each major race in return for serving in this capacity.

To avoid competition in the surrounding area which would endanger their large financial investment, Land and the other investors insisted that the following clause be inserted into the contract:

"AHRA' agrees that it will neither sanction nor sponsor, nor directly or indirectly support any other major race event upon any race track in the State of North Carolina, nor within a radius of 150 miles.'

Paragraph 20 defined a 'major race event' as

'any race for which 'AHRA' brings in a crew and manages the race, and/or for which 'AHRA' directly participates in securing the prize monies.'

Several months after the negotiation of the Rockingham contract, AHRA and Auto Racing Franchise Corporation (ARFCO) entered, on December 11, 1969, into a franchise agreement granting ARFCO exclusive sanctioning rights in certain areas of southeastern United States. ARFCO was a corporation formed to permit Carrier and his Bristol partner, Carl Moore, to share in the monies to be earned in representing AHRA throughout that area. Paragraph 6(e) of this agreement provided that ARFCO agreed to:

'refrain from . . . in any way aiding any other racing organization, race promoters, automobile sanctioning bodies, or other parties now or to be in competition in drag racing with AHRA . . .. ARFCO further agrees to obtain from any of its officers and key employees . . . a non-competition covenant (copy of which is attached hereto) and ARFCO hereby agrees to make said non-competition covenant a prerequisite for employment . . ..'

Pursuant to the AHRA-ARFCO agreement, Carrier executed a covenant not to compete with AHRA, on December 15, 1969, as follows:

'The undersigned does hereby covenant, contract and agree that during the time he is an office holder of, a member of the Board of Directors of, or an employee of ARFCO, and for five (5) years after his total termination with ARFCO, he will not directly or indirectly, as principal, partner, agent, employee, or otherwise compete with AHRA, carry on or be concerned with, or be financially interested in drag race promotions, scheduling, or any other arrangements relating to drag racing, except as the owner of a single track, . . ..'

During late 1968 and throughout much of 1969, Carrier supervised the development of the Rockingham track, both in the planning and construction stages. Three major drag events were held at Rockingham under the October 5, 1968 contract. These occurred in the fall of 1969, and the spring and fall of 1970. But major areas of disagreement soon developed between AHRA and the investors. Well-known race drivers, promised by AHRA, often failed to appear at Rockingham as advertised to the public. The large purses failed to materialize. Disputes arose over the proper accounting of receipts and expenses. And AHRA refused to allow representatives of the investors to operate or jointly staff the pit gates in accordance with provisions in their contract. AHRA also scheduled another major event to conflict with the Rockingham date. During the September 1970 race, when Land and Carrier complained, Tice allegedly explained that if Land and the others were not satisfied they could tear up the contract. Finally, it was learned in November or December of 1970 that, in violation of the terms of the October 5, 1968 agreement, Tice and AHRA, on December 16, 1969, had contracted to sanction and sponsor two major drag races annually in Myrtle Beach, South Carolina, located within less than 150 miles of Rockingham, North Carolina.

Shortly after the September 1970 race, Carrier informed Land and the other investors of his decision to form a sanctioning body. On November 12, 1970, Carrier incorporated the International Hot Rod Association (IHRA) for the purpose of operating and sanctioning racing events of all kinds. On November 19, 1970, Land advised Tice that Rockingham was repudiating the contract of October 5, 1968. On November 23, 1970, however, Land's attorney wrote Tice, stating that his clients intended to abide by the contract and also that they expected Carrier and AHRA to do the same. Later, on December 10, 1970, Tice, his attorney, and the investors met at the track site in an unsuccessful attempt to reach an accommodation. But, by letter of December 14, 1970, Land and the other investors again repudiated the October 5, 1968 contract.

On December 17, 1970, Rockingham entered into a sanctioning contract with Carrier's IHRA. Under this agreement, IHRA was to share in the net...