Continental Nut Company v. Robert L. Berner Company

Decision Date17 May 1968
Docket NumberNo. 16268.,16268.
Citation393 F.2d 283
PartiesCONTINENTAL NUT COMPANY, Plaintiff-Appellant, v. ROBERT L. BERNER COMPANY, Defendant-Appellee.
CourtU.S. Court of Appeals — Seventh Circuit

Robert A. Sprecher, James C. Leaton, Joseph M. Taussig, Chicago, Ill., for plaintiff-appellant.

Robert F. Hanley, A. Daniel Feldman, Robert L. Berner, Jr., Donald J. McLachlan, Isham, Lincoln & Beale, Robert L. Berner, Jr., Chicago, Ill., for defendant-appellee; Baker & McKenzie, Chicago, Ill., of counsel.

Before HASTINGS, Chief Judge, and CASTLE and SWYGERT, Circuit Judges.

CASTLE, Circuit Judge.

In Continental Nut Company v. Robert L. Berner Company, 7 Cir., 345 F.2d 395, this Court held that the plaintiff's (Continental's) complaint against Robert L. Berner Company and certain other defendants stated a cause of action in libel. We there held that the statements in the alleged publication, though not of a character which would constitute a libel per se, are of the type which may constitute a libel per quod, and that Continental sufficiently alleged special damages so that its complaint was not vulnerable on that score. We reversed the District Court's dismissal of the complaint as to Robert L. Berner Company and certain of the other named defendants. The case was subsequently tried to a jury which returned a verdict for the plaintiff and against the defendant, Robert L. Berner Company in the sum of $212,000 actual damages and $212,000 punitive damages. Rulings on post-trial motions culminated in the court's granting the defendant Berner Company's motion for judgment n. o. v.1 and entering judgment for the defendant. Plaintiff Continental appealed.

The main contested issue presented by plaintiff's appeal is whether the plaintiff made such proof of special damages as is required under Illinois law to sustain a verdict for actual damages and punitive damages in a libel per quod action.

In our opinion in the previous appeal (345 F.2d 395, 397) we declined to follow the rigid rule of Erick Bowman Remedy Co., Inc. v. Jensen Salsbery Laboratories, Inc., 8 Cir., 17 F.2d 255, that generally a complaint seeking special damages in a libel per quod case should specifically allege by name the customers claimed to have been lost. We observed that Erick Bowman antedated the liberalized pleading requirements of the Federal Rules of Civil Procedure. We found that the plaintiff's allegations of the specific figures of its gross sales before and after the publication coupled with the averment that the decrease was the natural and proximate result of the letter involved were sufficient from the pleading standpoint to state a claim in libel per quod. But we were not there concerned with the nature or quantum of the proof requisite to recovery upon such a claim. We recognized only that "notice" pleading dispensed with any requirement that the complaint set forth with particularity the name of each customer allegedly lost.

The record discloses that plaintiff is a California corporation which buys various kinds of nuts, processes them, and then resells them. It sells both shelled and unshelled nuts. The defendant is an Illinois corporation engaged in a similar business but it sells only unshelled nuts. Both of the corporations had been in the nut business for about 25 years, and each operated this business through brokers. The plaintiff had 66 brokers selling to its customers, and the defendant 64 brokers. Each sells unshelled Brazil nuts. The Brazil nuts imported by the plaintiff are of the type known as "natural" nuts. They are cured, dried, and processed after importation and before offered for resale by the plaintiff. The Brazil nuts sold by the defendant are dried, cured, and processed before being imported.

At the beginning of the 1961 season for the domestic sale of Brazil nuts the defendant sent a letter under date of September 25, 1961, to its 64 exclusive brokers. In this letter the "natural" Brazil nuts, such as those imported by the plaintiff, were referred to as "green" nuts. It was claimed that such nuts were "rarely, if ever, properly cured" and it was stated that 45% of all of the Brazils imported for the season were "green" but that defendant had imported only dried nuts. Moreover, the letter claimed that because of a moisture in the nuts, "The people who buy Green Brazil Nuts (and most of them won't know they are getting green nuts) will have a shrinkage on their hands and the nuts will develop mould". The letter warned that "Food and Drug will be more active than ever" and that "somebody is going to be in trouble" if the Food and Drug inspectors find that the green Brazil nuts do not meet the proper standards. At the end of the letter the defendant listed plaintiff Continental Nut Company as one of the four importers bringing most of the green Brazil nuts into the country.

Circulation of this letter solely to defendant's brokers could not injure the plaintiff, since defendant and the plaintiff make their sales to customers through different brokers. However, there is testimony by four of the plaintiff's brokers that some seven or eight of their customers saw the letter and that three of these identified customers did not buy from plaintiff in 1961 or 1962. And, plaintiff's president testified that of the 384 customers, plaintiff had in 1960, 92 did not buy from it in 1961, and an additional 51 did not buy from it in 1962. None of these previous customers were called as witnesses nor was any evidence adduced as to the buying requirements of the three customers who saw the letter and placed no order with plaintiff in 1961 or 1962, nor with respect to the estimated profit plaintiff would have realized from purchases of these customers had their patronage remained with the plaintiff. Thus, the record is barren with respect to evidence of the sales and profit figures concerning the three customers shown to have seen the letter. Likewise, there is no evidence with respect to sales and profit figures relating to the other 140 previous customers, who did not reorder from the plaintiff in 1961 or 1962, although the evidence discloses that the plaintiff did maintain an account card for each of its customers, showing name and address and each purchase made by the customer. Moreover, plaintiff's president testified that of the previous customers who failed to buy from the plaintiff in 1961 and 1962 he did not know as a fact what customers the plaintiff lost as a result of the defendant's letter nor did he know whether the plaintiff lost any prospective customers.

The evidence as to monetary damages relied upon by the plaintiff to support and sustain the verdict consists of certified audit reports showing a decline in plaintiff's net sales, gross profits, net profits, earned surplus, and sales of Brazil nuts and of mixed nuts following the circulation of the letter to defendant's brokers as compared with increases in equivalent figures for the defendant (although only 40% of the defendant's business was in nuts — it also handled fruits and vegetables); and of testimony of a certified public accountant relative to a projected loss of profits by the plaintiff on sales of Brazil nuts and of mixed nuts during the two year period (the 1961 and 1962 seasons) following circulation of the letter.

Although the certified audit report figures might have been of some corroborative value in another context they are not meaningful here. They do not serve to establish loss of profit due to loss of sales of Brazil nuts, much less that any such loss was the result of patronage withheld because of the letter.

In making his projection of loss of profits the accountant witness assumed that plaintiff would have sold all of the Brazil nuts it purchased for the 1961 season during that season, subtracted the amount actually sold, and on the basis of "unrealized sales" applied an average sales price and profit margin which indicated a loss in net profits of $254,064 for the 1961 season, the year ended June 30, 1962. A figure of $179,261 loss of net profits for the succeeding year was similarly arrived at on the basis of averaging the actual sales for the years ended June 30, 1960, and June 30, 1961, and the sales...

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