Atlantic Richfield Co. v. Misty Products, Inc.

• Decision Date: 19 December 1991
• Docket Number: No. C14-90-00741-CV,C14-90-00741-CV
• Citation: 820 S.W.2d 414
• Parties: ATLANTIC RICHFIELD COMPANY, Chemlink Inc., Richard Quinn, and S.M. Murphy, Appellants, v. MISTY PRODUCTS, INC., d/b/a MPI Products, and Misty Rucker, Appellees. (14th Dist.)
• Court: Texas Court of Appeals

Page 414

820 S.W.2d 414

ATLANTIC RICHFIELD COMPANY, Chemlink Inc., Richard Quinn, and S.M. Murphy, Appellants, v. MISTY PRODUCTS, INC., d/b/a MPI Products, and Misty Rucker, Appellees.

No. C14-90-00741-CV.

Court of Appeals of Texas,

Houston (14th Dist.).

Dec. 19, 1991.

Rehearing Denied Jan. 23, 1992.

Thomas G. Greene, III, Linda Broocks, Houston, for appellants.

Michael Y. Saunders, Carl D. Kulhanek, Jr., Houston, for appellees.

Before ROBERTSON, SEARS and DRAUGHN, JJ.

MAJORITY OPINION

ROBERTSON, Justice.

This is an appeal from a judgment in favor of Misty Products, Inc., d/b/a MPI Products ("MPI"), and Misty Rucker based on jury findings of false representations, conspiracy, and misappropriation of trade secrets. The jury awarded appellees $1,030,000.00 in actual damages and a total of $890,000.00 in punitive damages. Appellants bring eighteen points of error, primarily complaining of insufficient evidence to support the jury's findings of liability and damages. We reverse.

On an annual contract basis, MPI supplied Atlantic Richfield Company ("ARCO") with industrial cleaners and related equipment from 1980-84. In the summer of 1984, Misty Rucker, owner of MPI, had discussions with Frank Sullivan, a regional manager for ARCO, Chemlink Division, regarding the possible sale of MPI to Chemlink. Sullivan had previously heard from a Chemlink Sales Manager in Beaumont that ARCO should consider entering the industrial soap market. Sullivan contacted Richard Quinn, Marketing and Planning Manager of Chemlink in Philadelphia, regarding Chemlink's interest in acquiring MPI. Quinn testified that he requested and received general product information from MPI. Rucker testified, however, that Quinn requested and received confidential financial data. Chemlink subsequently advised Rucker that they were not interested in acquiring MPI.

The ARCO Purchasing Manager, Steve Murphy, became concerned about the increasing cost of industrial cleaners in 1984. Although there were no complaints about the MPI product's quality, an investigation revealed that increased quantities of the product were being used. Murphy spoke to James Waterfallen, Chemlink Area Manager who in turn spoke to the Chemlink product development division about the possibility of developing an industrial cleaner.

In Fall 1984, Chemlink decided to bid on the ARCO industrial cleaner contract. Chemlink's chemists bought an industrial cleaner concentrate (Stepan) and diluted it with water. This cleaner, named IPC 5180, was the product Chemlink submitted in its bid in December 1984. Because the Stepan product contained a hazardous chemical, Chemlink ultimately supplied ARCO with another product containing the concentrate Witco 45DS.

ARCO conducted a test of all products involved in the bidding. The tests revealed that the MPI, Chemlink, and Oakite products performed satisfactorily. The Oakite product performed best, but was more expensive than the others. Although the Chemlink product cost more per gallon than the MPI product, Chemlink included an activity percentage that showed its product to be more cost effective than MPI's product. ARCO ultimately chose to award the contract to Chemlink. Chemlink's product did not have a material safety data sheet (MSDS), which ARCO required in the bids, but an MSDS was supplied before the product was delivered to the plant.

The ARCO contract was 50-60% of MPI's total business and the loss of this contract resulted in a loss of approximately $300,000.00 in annual gross sales. Rucker and her employees took pay cuts and attempted to recover the ARCO business in 1986. In the ARCO tests for the 1986 contract bids, Chemlink's product received the poorest performance rating. The Maintech product had the best performance and price and was awarded the 1986 ARCO contract. The loss of the ARCO business ultimately caused Rucker to file bankruptcy.

MPI filed suit in 1988 against appellants alleging breach of contract, unfair competition, tortious interference with contract and with business relations, misappropriation of trade secrets, conspiracy, misrepresentation (fraud), conversion, quantum meruit, and negligent and intentional infliction of emotional distress. The case was tried to a jury. The judgment indicates that the trial court granted appellants' motion for instructed verdict on all claims other than fraud, conspiracy, and misappropriation of trade secrets. On the claims submitted, the jury found: (1) misappropriation of MPI's trade secrets by ARCO, Chemlink, and Steve Murphy, as an employee or agent of ARCO; (2) civil conspiracy to deprive MPI of business by Chemlink, ARCO, and Murphy as employee of ARCO, and by Richard Quinn as employee of Chemlink; and (3) misrepresentation by Chemlink, ARCO, and Murphy as employee of ARCO.

In points of error three through seven, appellants challenge the jury's findings of false representations. In point of error six, appellants contend no evidence supports the jury's finding that Murphy made a false representation. In points of error four, five, and seven, appellants claim insufficient evidence supports the jury's findings that Chemlink, ARCO, and Murphy made false representations.

In reviewing a no evidence point, we may consider only the evidence and inferences tending to support the jury's finding, disregarding all evidence and inferences to the contrary. Best v. Ryan Auto Group, Inc., 786 S.W.2d 670, 671 (Tex.1990). If any evidence of probative force supports the finding, the point must be overruled. Southern States Transp., Inc. v. State, 774 S.W.2d 639, 640 (Tex.1989). If, on the other hand, the evidence is so weak as to create mere surmise or suspicion of the existence of a fact, the evidence is no more than a scintilla and is no evidence. Kindred v. Con/Chem, Inc., 650 S.W.2d 61, 63 (Tex.1983).

Where a party alleges factually insufficient evidence to support a finding, the court must review all of the evidence. Plas-Tex, Inc. v. United States Steel Corp., 772 S.W.2d 442, 445 (Tex.1989). The reviewing court may set aside the finding only if the evidence is too weak to support the finding or if the finding is so against the overwhelming weight of the evidence as to be manifestly unjust. See Wilson v. Goodyear Tire & Rubber Co., 753 S.W.2d 442, 448 (Tex.App.--Texarkana 1988, writ denied).

In their petition, appellees pled misrepresentation and fraud, alleging that appellants misrepresented facts with the intent of inducing appellees to disclose confidential MPI product and equipment data and to submit a bid with sealed trade secrets when ARCO was engaged in preferential bidding practices. The elements of actionable fraud are: "(1) that a material representation was made; (2) that it was false; (3) that, when the speaker made it, he knew it was false or made it recklessly without any knowledge of its truth and as a positive assertion; (4) that he made it with the intention that it should be acted upon by the party; (5) that the party acted in reliance upon it; and (6) that he thereby suffered injury." Trenholm v. Ratcliff, 646 S.W.2d 927, 930 (Tex.1983) (quoting Wilson v. Jones, 45 S.W.2d 572, 574 (Tex.Comm.App.1932, holding approved)). Given an instruction closely resembling the above definition of fraud, the jury found that Chemlink, ARCO, and Murphy, acting in the course and scope of his employment for and as an agent of ARCO, committed fraud.

We find insufficient evidence to support a finding that ARCO or Chemlink made false representations to MPI with the intent to induce MPI to disclose confidential data or to submit a bid with sealed trade secrets. Appellees contend ARCO's feigned interest in acquiring MPI came through the Chemlink chain of command and induced Misty Rucker to disclose considerable confidential MPI information. To constitute a false representation, the evidence would have to show that ARCO and Chemlink falsely represented ARCO's interest in acquiring MPI.

The record indicates that Frank Sullivan, an area manager for Chemlink, discussed with Misty Rucker Chemlink's possible interest in acquiring MPI. This discussion occurred in the summer of 1984. Sullivan contacted Quinn, Marketing and Planning Manager for Chemlink in Philadelphia, to determine whether Chemlink was interested in MPI as a possible acquisition. Quinn testified that he requested only general product information from Rucker. Although the letter from Rucker to Quinn indicates that it transmits "various product data and equipment information," Rucker testified that she also sent Quinn confidential financial information. Quinn further testified that he gave the general product data to Bill Britton, another Chemlink manager in Philadelphia who was in charge of the industrial cleaner area. Quinn testified that he concluded from his own review of the material that Chemlink would not be interested in acquiring MPI and that Britton reached the same conclusion. Chemlink subsequently advised Rucker that they were not interested in pursuing acquisition discussions.

This evidence shows that Quinn and Sullivan, acting as employees of Chemlink, made representations to Rucker that ARCO might be interested in acquiring MPI. Appellees contend that the jury could infer these representations were false because they induced MPI to divulge confidential information which she would not have done had she known that Chemlink was preparing to bid against her for the ARCO contract. To raise a reasonable inference that Chemlink feigned an interest in MPI to gain access to MPI's confidential financial data, there must be some evidence of Chemlink's access to this data, such as using it to gain a competitive advantage in the bid process. Rucker testified that Chemlink reviewed MPI's books, financial statements, and assets. The record contains no evidence indicating that Chemlink used any confidential MPI data. In fact, the record shows that Chemlink submitted a bid using a different product than MPI, charging...