Cherick Distributors, Inc. v. Polar Corp.

• Decision Date: 28 October 1996
• Docket Number: No. 95-P-1369,95-P-1369
• Citation: 669 N.E.2d 218,41 Mass.App.Ct. 125
• Parties: , 30 UCC Rep.Serv.2d 464 CHERICK DISTRIBUTORS, INC. v. POLAR CORPORATION.
• Court: Appeals Court of Massachusetts

Page 218

669 N.E.2d 218

41 Mass.App.Ct. 125, 30 UCC Rep.Serv.2d 464

CHERICK DISTRIBUTORS, INC. v. POLAR CORPORATION.

No. 95-P-1369.

Appeals Court of Massachusetts, Worcester.

Argued May 10, 1996.

Decided Aug. 15, 1996.

Further Appellate Review Denied Oct. 28, 1996.

Roy A. Bourgeois, Worcester (George L. Dresser with him) for plaintiff.

James C. Donnelly, Jr., Worcester (Charles B. Strauss, III, with him) for defendant.

Before SMITH, PORADA and IRELAND, JJ.

IRELAND, Justice.

The defendant, Polar Corporation (Polar), appeals from a judgment entered for the plaintiff, Cherick Distributors, Inc. (Cherick), following a jury trial on the plaintiff's claims for breach of the covenant of good faith and fair dealing, tortious interference with advantageous relationships, and violation of G.L. c. 93A. The complaint arises from Polar's termination of the plaintiff's exclusive distributorship agreement for the delivery of Polar beverages in certain areas of Massachusetts and Connecticut. On appeal, Polar contends that evidence was lacking to support the jury verdicts in Cherick's favor on the three claims, and that Polar's motions for a directed verdict and for judgment notwithstanding the verdict were improperly denied. Polar also challenges the judge's instructions to the jury and the judge's computation of damages.

A motion for a directed verdict or for judgment notwithstanding the verdict may be granted only when the evidence construed most favorably to the plaintiff is insufficient to support the verdict in its favor. Alholm v. Wareham, 371 Mass. 621, 627, 358 N.E.2d 788 (1976). The familiar standard is "whether 'anywhere in the evidence, from whatever source derived, any combination of circumstances could be found from which a reasonable inference could be drawn in favor of the plaintiff.' " Poirier v. Plymouth, 374 Mass. 206, 212, 372 N.E.2d 212 (1978). A reasonable inference is one that is based on probabilities and not the result of "mere speculation and conjecture." Power Serv. Supply, Inc. v. E.W. Wiggins Airways, Inc., 9 Mass.App.Ct. 122, 127, 399 N.E.2d 878 (1980). Consistent with this standard, we address the defendants' arguments in turn.

1. Breach of the covenant of good faith and fair dealing. The evidence revealed that Polar terminated its unwritten distributorship agreement with Cherick upon discovering that Cherick's president, Richard Corey, had written a letter to other Polar distributors urging them to attend a meeting to discuss the possibility of forming an association to negotiate with Polar. As its reason for termination, Polar initially cited Cherick's expired letter of credit, which had expired a year and one-half earlier. However, Polar's vice president admitted that the letter of credit issue was a pretext. The termination of Cherick's contract was to take effect upon only four days' notice, on the eve of the distributors' scheduled meeting. On appeal, Polar counters that it was within its rights to terminate the at-will distributorship agreement at any time and for any reason, and that Cherick failed to prove that it could have found another beverage supplier even with a longer notice period.

"[T]he rule is clear in Massachusetts that every contract is subject to an implied covenant of good faith and fair dealing." Anthony's Pier Four, Inc. v. HBC Assocs., 411 Mass. 451, 473, 583 N.E.2d 806 (1991). Good faith and fair dealing in a distributorship agreement may be construed, by analogy, with reference to the Uniform Commercial Code. See Zapatha v. Dairy Mart, Inc., 381 Mass. 284, 291, 408 N.E.2d 1370 (1980). General Laws c. 106, § 2-309(3), provides that a contract which is terminable at the will of either party requires reasonable termination notice. See Teitelbaum v. Hallmark Cards, Inc., 25 Mass.App.Ct. 555, 560, 520 N.E.2d 1333 (1988) (applying G.L. c. 106, § 2-309(3), to an at-will contract for the periodic supply of inventory to the plaintiffs' greeting card store). Whether the four-day termination notice constituted reasonable notice under commercial standards of good faith and fair dealing was a question properly put to the jury in this case. Compare Teitelbaum v. Hallmark Cards, Inc., supra at 560-561, 520 N.E.2d 1333 (no jury question because the plaintiff procured another supplier before the notice period had expired).

The jury could have found that the abrupt termination of Cherick's distributorship agreement, coinciding as it did with the planned meeting of Polar distributors, was calculated to put Cherick out of business and thereby discourage other distributors from meeting. By the same token, the jury could have rejected Polar's assertion that the short notice period was for the purpose of protecting Polar's customers. The evidence indicated that the four-day notice left Cherick with no time to secure another supplier, make adjustments in its equipment and warehouse, and maintain its staff. ¹ Accordingly, there was adequate support for the jury's finding that four days' notice was unreasonable and that it constituted a breach of the covenant of good faith and fair dealing.

2. Tortious interference with advantageous relationships. Cherick claimed that Polar's abrupt termination of the distributorship agreement wrongfully interfered with Cherick's relationships with Polar customers. On appeal, Polar asserts that there was no evidence that it interfered through improper motives or improper means, and that, in any event, it was free to terminate Cherick at any time and for any reason, rendering Polar's means and motive immaterial.

On the contrary, the jury found that the unreasonably short termination notice was a breach of the implied covenant of good faith and fair dealing. As such, the means used to effect the termination, and concomitant interference, could be found to be wrongful, not because Polar was prohibited from terminating the contract, but because it did so on unreasonably short notice. Moreover, the jury could infer that Polar's opportunistic timing, with the termination to take effect on the eve of the distributors' meeting, was more than mere coincidence. Compare United Truck Leasing Corp. v. Geltman, 406 Mass. 811, 817, 551 N.E.2d 20 (1990) (insufficient evidence to warrant a finding that the defendant's real motive was to hurt the plaintiff). These considerations do become relevant in an action for tortious interference. It was then up to the defendant to prove that its actions were justified. See Draghetti v. Chmielewski, 416 Mass. 808, 818, 626 N.E.2d 862 (1994). Polar's attempts at justification fell flat. ²

3. General Laws c. 93A. Polar makes much of the evidence suggesting that Corey was not deceived by Polar's fabricated excuse for terminating the contract, namely Cherick's expired letter of credit. However, deception is only one prong of the prohibited conduct under G.L. c. 93A. The same evidence that supported the jury's findings of a breach of the covenant of good faith and fair dealing and tortious interference with advantageous relationships also supported the jury's finding that Polar's conduct amounted to an unfair or deceptive act under G.L. c. 93A. See, e.g., Anthony's Pier Four, Inc. v. HBC Assocs., 411 Mass. at 474, 583 N.E.2d 806.

4. Evidence of damages. The jury awarded Cherick $25,000 in lost profits for Polar's wrongful interference with Cherick's advantageous relationships, and $50,000 to compensate for the loss of Cherick's business caused by Polar's breach of the covenant of good faith and fair dealing. Polar maintains that there was no evidence of lost profits, nor could profits be inferred, because Cherick had lost money each year from...