Bowl-Mor Co., Inc. v. Brunswick Corp.

• Decision Date: 24 January 1972
• Docket Number: BOWL-MOR
• Citation: 297 A.2d 61
• Parties: COMPANY, INC., a Delaware corporation, Plaintiff, v. BRUNSWICK CORPORATION, a Delaware corporation, Defendant.
• Court: Court of Chancery of Delaware

Page 61

297 A.2d 61

BOWL-MOR COMPANY, INC., a Delaware corporation, Plaintiff, v. BRUNSWICK CORPORATION, a Delaware corporation, Defendant.

Court of Chancery of Delaware, New Castle County.

Jan. 24, 1972.

Paul P. Welsh, of Morris, Nichols, Arsht & Tunnell, Wilmington, and Jack R. Pirozzolo, of Herrick, Smith, Donald, Farley & Ketchum, Boston, Mass., for plaintiff.

John P. Sinclair, of Potter Anderson & Corroon, Wilmington, for defendant.

DUFFY, Chancellor:

Bowl-Mor Company, Inc., brought this action against Brunswick Corporation for injunctive relief and damages for tortious interference with present and prospective relationships with its customers. Injunctive relief was granted and the case proceeded on the damage claim but became inactive for some three years following Bowl-Mor's bankruptcy; trustees in bankruptcy now prosecute it for plaintiff.

A.

Bowl-Mor was organized in 1954 to manufacture automatic duckpin machines for use in bowing alleys throughout the United States. It began to produce tenpin ('large ball') bowling machines in 1961. Because of the relatively large investment required to establish a bowling center, automatic bowling machinery is rarely purchased outright; installation of the equipment is usually financed by lease, conditional sale, chattel mortgage or other 'installment' plan. Bowl-Mor usually provided financing to a customer through a lease which was then sold, with recourse, to C.I.T. Leasing Corporation (CIT) or to General Electric Credit Corporation (GECC).

During 1962 and 1964 the bowling equipment business was highly competitive. Brunswick and AMF dominated the market by making some 99% Of annual sales. AMF contracts with alley operators were expiring and Brunswick developed an aggressive plan to persuade them to convert to its equipment. (Bowl-Mor also had a 'conversion sale plan.') Bowl-Mor leases were also a target of the plan. There is substantial dispute as to precisely what Brunswick did Vis-a-vis Bowl-Mor, but for present purposes it is enough to say that Brunswick sales people called on operators using Bowl-Mor equipment with a view to persuading them to 'convert.' A number of Bowl-Mor lessees defaulted, Bowl-Mor pinsetters were 'ripped out' and some conversions were made to Brunswick equipment. Brunswick's record here it that all such changes were the result of wide-spread dissatisfaction with performance of the Bowl-Mor equipment.

At this time in the litigation Brunswick seeks summary judgment as to claims based on alleged interference with: (1) any contractual relationships between Bowl-Mor and operators whose leases were assigned to CIT or GECC; (2) contracts with the operators of Larchmont Lanes and Melody Bowl; and (3) with prospective customers. Before discussing that motion I must first consider a motion by Bowl-Mor for permission to supplement and amend the complaint.

B.

The complaint was filed on May 25, 1965, the motion was filed on November 16, 1971. As I read Brunswick's memorandum, it does not oppose the motion to supplement, and that will be granted.

The motion to amend seeks to added to the complaint allegations as to violation of antitrust laws in Illinois, Indiana, Iowa, Michigan, Minnesota, Missouri, Nebraska, New York, Ohio and Wisconsin. Those statutes are apparently designed to prevent or prohibit monopolization. The parties differ over what new facts such allegations will necessarily introduce into the case. Thus Brunswick says that Bowl-Mor would have to show monopoly power by establishing the number of operations of various manufacturers in the states involved; Bowl-Mor disagrees. But it is undisputed that the amendment would require Brunswick to add additional factual matter in relationship to its claims of a superior product, business ability and acumen, or better customer service. And it would add substantial legal questions involving interstate commerce, the effective date of the statutes, statutes of limitations and others.

Liberality of amendment to a pleading is a tradition in the courts of this State and that certainly includes this one. But serious prejudice to one opposing the motion is a reasonable limitation on that liberality. And I find it here. We are almost seven years into the suit, there are ten full files in the court jacket, the case has been marked for trial on two occasions. All things have their season and, as I see it, the season for new factual allegations (of the dimensions proposed) has ended in this case. The motion for leave to amend will be denied. ¹

It does not necessarily follow, however, that plaintiff will be precluded from arguing that evidence received within the perimeter of the present pleadings violates a specific statute of another state. I say this because 10 Del.C. § 4314(a) requires this Court to take judicial notice of the common law and statutes of every state of the United States. If noticing the anti-trust statutes will require new factual inquiries, then that will not be done for the reasons I have stated. In any event, on application counsel will be heard as to § 4314(a) and any other related statutes.

C.

Turning to the motion for summary judgment, plaintiff argues that Brunswick's implementation of the conversion plan was unlawful because the acts taken induced breaches of contract between the bowling alley operators and Bowl-Mor. Defendant says that there were no existing contracts between Bowl-Mor and the lessees who switched because plaintiff had assigned all title and interest in the leases when it sole them to CIT and GECC. Brunswick says that since the assignments were absolute, Bowl-Mor thereafter had no interest in the leases and, hence, it cannot sue for alleged interference with them.

The general principle applicable to interference with an advantageous business relationship is stated in the Restatement of Torts, § 766 (1939), as follows: ²

'Except as stated in Section 698, one who, without a privilege to do so, induces or otherwise purposely causes a third person not to

(a) perform a contract with another, or

(b) enter into or continue a business relation with another

is liable to the other for the harm caused thereby.'

A 'privilege' is available to a competitor who may, under certain circumstances, purposefully cause a third person not to enter into or continue a business relationship, Restatement, supra, § 768:

'(1) One is privileged purposely to cause a third person not to enter into or continue a business relation with a competitor of the actor if

(a) the relation concerns a matter involved in the competition between the actor and the competitor, and

(b) the actor does not employ improper means, and

(c) the actor does not intend thereby to create or continue an illegal restraint of competition, and

(d) the actor's purpose is at least in part to advance his interest in his competition with the other.

(2) The fact that one is a competitor of another for the business of a third person does not create a privilege to cause the third person to commit a breach of contract with the other even under the conditions stated in Subsection (1).'

See 9 A.L.R.2d 255. The privilege available to a competitor, as expressed in § 768, has judicial approval in Delaware. Regal Home Distributors, Inc. v. Gordon, Del.Super, 6 Terry (45 Del.) 49, 66 A.2d 754 (1949).

Bowl-Mor and Brunswick were competitors. Brunswick was, therefore, entitled to the privilege of a competitor. It argues that in the absence of contracts between Bowl-Mor and the alley operators who switched, and since it did not maintain an illegal restraint of compensation nor make any false representations about Bowl-Mor equipment, it is entitled to judgment on undisputed facts.

Bowl-Mor says that it retained a property interest in the leases assigned to CIT or GECC and therefore has a right to an action based on interference with the contracts. The difficulty is that Bowl-Mor fails to identify what interest it retained in the leases. ³ True it is that Bowl-Mor had post-assignment relationships with the operators: the arrangements with the finance companies required Bowl-Mor to see that the equipment was serviced, maintained and insured. But the existence of those duties due the finance company would be a fragile basis on which to conclude that Bowl-Mor retained a 'property interest' in the contracts. The short of it is, Bowl-Mor retained no such interest. The sales were complete, the assignments were absolute (all right, title and interest in the account and in the equipment were 'sold'), and therefore Bowl-Mor did not have 'contracts' with operators within the meaning of § 768 of the Restatement. ⁴

I conclude that Brunswick is under no liability to Bowl-Mor for purposely causing alley operators not to perform contracts with it. In sum, there is no liability based upon the Restatement, § 766(a).

But paragraph (b) of the Restatement states there is liability for purposefully causing a third person not to continue a business relation with another. Comment b applies this to 'unjustified interference with reasonable expectancies of commercial relations even when an existing contract is lacking.' A more precise statement of the law appears at 45 Am.Jur.2d, Interference § 50:

'The basic elements which establish a prima facie tortious interference with a business relationship are the existence of a valid business relation (not necessarily evidenced by an enforceable contract) or expectancy; knowledge of the relationship or expectancy on the part of the interferer; an intentional interference inducing or causing a breach or termination of the relationship or expectancy; and resultant damage to the party whose relationship or expectancy has been disrupted. One is liable for commission of this tort who interfers with business relations of another, both existing and prospective, by inducing a third person not to enter into or continue a business relation with another or by preventing a third person from continuing a business...