Brewster Wallcovering v. Blue Mountain

• Decision Date: 06 April 2007
• Docket Number: No. 05-P-1044.,05-P-1044.
• Citation: 68 Mass. App. Ct. 582,864 N.E.2d 518
• Parties: BREWSTER WALLCOVERING COMPANY v. BLUE MOUNTAIN WALLCOVERINGS, INC.
• Court: Appeals Court of Massachusetts

864 N.E.2d 518

68 Mass. App. Ct. 582

BREWSTER WALLCOVERING COMPANY v. BLUE MOUNTAIN WALLCOVERINGS, INC.

No. 05-P-1044.

Appeals Court of Massachusetts, Norfolk.

Argued September 20, 2006.

Decided April 6, 2007.

Mark C. Fleming, Boston (Michael R. Heyison, Pratik A. Shah, & Francis J. DiMento with him) for the defendant.

William C. Nystrom, Boston (Colleen C. Cook & Joel G. Beckman with him) for the plaintiff.

Present: RAPOZA, C.J., LAURENCE & GRAINGER, JJ.

LAURENCE, J.

This appeal arises out of a wallpaper distributor's complaint that a wallpaper manufacturer breached its agreement to supply the distributor with certain lines of wallpaper by consistently failing to fill orders in a timely manner, and additionally committed intentional misrepresentation and a G.L. c. 93A violation with respect to the agreement. The complaint of the plaintiff distributor, Brewster Wallcoverings Company (Brewster), a Massachusetts entity, against the defendant manufacturer, Blue Mountain Wallcoverings, Inc. (Blue Mountain), a Canadian company, also alleged breach of the implied covenant of good faith and fair dealing, promissory estoppel, fraudulent inducement, and interference with advantageous customer relations.

After an eight-day trial beginning on September 15, 2003, the case was submitted to the jury on special questions, in answer to which the jury found Blue Mountain liable on all counts, including a finding that the c. 93A violation had been committed "wilfully or knowingly," and awarded Brewster a lump sum of $2,348,288 in compensatory damages.¹ After a posttrial hearing, the trial judge awarded Brewster double damages on the basis of the "wilful or knowing" finding and $624,614.53 in attorney's fees under c. 93A, stating, "I adopt the decision of the jury on the 93A claim and find it is well supported by the evidence."²

The principal question before us is whether Brewster presented sufficient evidence at trial to warrant the jury's verdicts. We reverse the verdict on the count for tortious interference with advantageous customer relations as unsupported by the evidence and we vacate the damages verdict (including the judge's order awarding double damages on the c. 93A count) because Brewster failed to present evidence of any efforts to mitigate its damages and also presented insufficient evidence to support two constituent elements of its claim for damages.

I. Factual background. A. Breach of contract. We recite the most pertinent facts that the jury could have found based on the evidence viewed in the light most favorable to Brewster (with certain other material facts reserved for discussion of specific issues). Brewster is a wallpaper distributor that has operated as a family-run business since the 1890's, with a principal office in Randolph.³ Its geographic area of distribution encompasses the United States, with office and warehousing facilities in Massachusetts, Kentucky, and California. As is typical of a distributor in the wallpaper industry, Brewster purchased sample books of wallpaper patterns from manufacturers and placed those books in retail stores.⁴ For more than twenty years, Brewster had a relationship with GenCorp, Inc. (GenCorp), the manufacturer of the "GenCorp" lines of wallcoverings, which included one of Brewster's best-selling wallpaper brands, "Sanitas," among others.⁵ One of several GenCorp distributors, Brewster held the exclusive right to distribute the GenCorp lines in the mid-Atlantic region of the country, a particularly lucrative area.

On December 11, 1998, Blue Mountain acquired from GenCorp certain assets, including the rights and equipment to print the GenCorp lines, consisting of five brands of wallpaper: Sanitas, Essex, Fashon, Chapters, and Designs for Living. The asset purchase agreement required Blue Mountain to transfer GenCorp's wallpaper inventory and printing presses from GenCorp's plant in Mississippi to Blue Mountain's warehouse in Toronto, Canada. On December 3, 1998, Blue Mountain's president, Christopher Wood, met Brewster's president, Kenneth Grandberg, for dinner to discuss the impending GenCorp transaction. Wood assured Grandberg that there would be a "seamless transition" of the manufacturing and distribution of the GenCorp lines from GenCorp to Blue Mountain.

On December 18, 1998, Wood, accompanied by Blue Mountain's vice-president of sales and marketing, John Hooker, met with Grandberg and other Brewster representatives at Brewster's headquarters in Randolph (sometimes referred to as December 18 meeting).⁶ At that meeting, Wood orally agreed to continue to do "business as usual" with respect to GenCorp products, and to accept Brewster's purchase orders and service the GenCorp lines in a timely manner through their discontinuation dates.⁷ In return, Brewster promised to continue to promote and distribute the GenCorp lines to its retail customers by carrying adequate inventory of such lines as it had done historically, keeping GenCorp sample books on the shelves, and filling orders for GenCorp products.

According to Brewster witnesses, Wood made several other promises to Brewster at the December 18 meeting. First, he stated that there would be no service interruption to Brewster caused by the transfer of the physical assets of the business from GenCorp's headquarters in Mississippi to Blue Mountain's plant in Toronto. Second, he told of his plan to keep two GenCorp printing presses running in Mississippi while the remaining presses were disassembled and shipped to Toronto.⁸ In addition, Wood promised that the machinery would be transferred and production would begin in Toronto by March 1, 1999.⁹ He further expressed his intention to move GenCorp's existing inventory from Mississippi to Toronto and to use that inventory to fill purchase orders until Blue Mountain was capable of printing new product in Canada.

Although the oral agreement made at the December 18, 1998, meeting (sometimes referred to as December 18 agreement) was never manifested in a written contract, it was subsequently reflected in multiple writings between the parties. Within three business days of that agreement, Brewster began placing orders for GenCorp products by sending Blue Mountain written purchase orders. On December 23, 1998, Brewster faxed Blue Mountain a signed memorandum setting forth the procedures for filling its orders, which required Blue Mountain to confirm acceptance of an order by faxing back a corresponding reference number and invited Blue Mountain to call if it had any questions regarding Brewster's terms. Blue Mountain confirmed acceptance of those purchase orders without question or qualification—as it did with respect to every subsequent Brewster order until the relationship soured in December, 1999—in the manner specified by Brewster, i.e., by assigning a reference number to each purchase order and faxing the reference number back to Brewster.

Brewster also regularly requested production dates from Blue Mountain, which Brewster deemed were "critical" so as to allow it to advise customers of expected delivery dates on orders and on back ordered items. Not until April, 1999, however, did Blue Mountain begin providing written production dates to Brewster, virtually none of which proved reliable. Finally, written correspondence between the parties regarding the GenCorp lines confirmed the business relationship. In particular, in October, 1999, Brewster and Blue Mountain exchanged letters confirming an extension of the expiration dates on certain wallpaper lines.

At trial, it was undisputed that Blue Mountain provided exceptionally poor and usually untimely service to all of its distributor customers¹⁰ on the GenCorp lines from December, 1998, through December, 1999. Brewster offered testimony that, prior to Blue Mountain's acquisition of the GenCorp lines, Brewster was able to fill customers orders the same day over ninety percent of the time.¹¹ Because of Blue Mountain's almost consistently tardy service, Brewster reached a zero-percent "fill-rate" with one of its major national customers, Home Depot (i.e., Brewster was unable to fill a single GenCorp order because items were out of stock and placed on back order). By May, 1999, Brewster's back orders on GenCorp products had reached "crisis" proportions, accumulating to an unprecedented high of 157,000 rolls.¹² Brewster personnel testified that its customer service line was inundated by calls from angry retailers many of whom said they were cancelling or threatened to cancel their orders.¹³

At a meeting between the parties on May 18, 1999, Wood assured Brewster that Blue Mountain had resolved its problems and agreed to send a public relations letter to Brewster's customers, accepting responsibility for poor service on the GenCorp lines and assuring them that its "problems . . . are now behind us." Blue Mountain also committed to filling eighty percent of Brewster's back orders in five weeks and promised to provide Brewster with accurate production dates.¹⁴ Nonetheless, six weeks after the May, 1999, meeting, Blue Mountain still owed Brewster 125,000 rolls of wallpaper on back order.¹⁵ Over the course of the next several months, Blue Mountain attempted to fill outstanding back orders and maintain improved production levels. Somewhat mollified by these concerted efforts, Brewster sent a letter to Blue Mountain on August 19, 1999,¹⁶ agreeing to forge ahead in early 2000 on the "Diane Richmond" line, a new collection of wallpapers to be manufactured by Blue Mountain and distributed exclusively by Brewster.¹⁷

Despite Blue Mountain's efforts to improve production, Brewster ultimately became totally dissatisfied with service on the GenCorp lines. Grandberg testified that he had lost confidence in Blue Mountain as a manufacturer beginning at the end of October or early November. By December, 1999, Brewster had filed the underlying action against Blue Mountain¹⁸ and had also terminated the August, 1999, agreement...