Crossland v. Canteen Corp.

• Decision Date: 12 August 1983
• Docket Number: Nos. 82-1141 and 82-1344,s. 82-1141 and 82-1344
• Citation: Crossland v. Canteen Corp., 711 F.2d 714 (5th Cir. 1983)
• Parties: 1983-2 Trade Cases P 65,542 Gary CROSSLAND, et al., Plaintiffs-Appellees Cross-Appellants, v. CANTEEN CORPORATION, Defendant-Appellant Cross-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 714

711 F.2d 714

1983-2 Trade Cases P 65,542

Gary CROSSLAND, et al., Plaintiffs-Appellees Cross-Appellants, v. CANTEEN CORPORATION, Defendant-Appellant Cross-Appellee.

Nos. 82-1141 and 82-1344.

United States Court of Appeals Fifth Circuit.

Aug. 12, 1983.

Mark Howell, El Paso, Tex., Robert E. Mason, H. Blair White, Chicago, Ill., for defendant-appellant cross-appellee.

Kenneth L. King, Dallas, Tex., for plaintiffs-appellees cross-appellants.

Appeals from the United States District Court for the Western District of Texas.

Before GOLDBERG, GEE and RANDALL, Circuit Judges.

RANDALL, Circuit Judge:

This case arises out of a business relationship gone sour. The individual plaintiff, Gary Crossland, is the principal shareholder of each of the two corporate plaintiffs, Garland Company and Canteen Southwest, Inc. The plaintiffs operated a vending machine business that for a time held a franchise from the defendant, Canteen Corporation. After Canteen ended the franchise relationship, the plaintiffs filed this suit, alleging violations of the antitrust laws and the Texas Deceptive Trade Practices Act, common-law fraud, conversion, and breach of contract. Canteen counterclaimed for breach of contract. Both sides now appeal from a judgment almost totally in favor of the plaintiffs.

I. FACTUAL AND PROCEDURAL BACKGROUND.

A. The Business Relationship.

Crossland started a vending machine business in El Paso, Texas, in the early 1960s. In 1969, he incorporated Garland Company to run that business. Although Garland had apparently had credit problems for some time, in 1973 it bid successfully for the vending business at Fort Bliss, Texas. The expansion to serve Fort Bliss evidently exacerbated Garland's financial problems.

Beginning in 1972, there were negotiations between Canteen and Crossland about making Garland a Canteen franchisee. In August, 1974, the parties agreed that Garland would receive a franchise and that Canteen would provide the business with some badly needed capital by buying all of Garland's vending equipment for $350,000 and then leasing the equipment back to Garland. On October 10, 1974, Canteen and Crossland entered into a franchise agreement, which Crossland immediately assigned to Canteen Southwest, a new corporation formed to operate Garland's business as a Canteen franchisee. (The business, however, continued to use the name Garland.)

Unfortunately, the new Canteen franchise was, if anything, less successful than Garland had been on its own. The franchise's debt to Canteen for franchise fees, lease payments on equipment, and products bought from Canteen for resale in the machines mounted rapidly. By April, 1976, Garland allegedly owed Canteen approximately $320,000, and litigation ensued. In September, 1976, the parties settled: Garland paid Canteen $45,000 and gave it a note for the balance of the debt. The note was secured by Garland's assets. Garland's debt continued to increase, however, and allegedly reached $420,000 by April, 1977.

At that point, the parties again negotiated an agreement, which was signed on May 5, 1977. Under this contract, Canteen was to audit Garland's business. Canteen would value each Garland asset at the higher of its book value or market value, and credit Garland with $100,000 for its location contracts and $120,000 for a covenant not to compete. Canteen would then take over Garland's business, and the parties would settle in cash any difference between the value of the business and the debt to Canteen.

After Canteen performed the audit, it found that Garland still owed it $15,800. The plaintiffs refused to accept the audit figures and brought this suit.

B. The Suit.

The plaintiffs raised a bewildering array of claims. First, they alleged that Canteen had violated section 1 of the Sherman Act, 15 U.S.C. § 1 (1976), and section 3 of the Clayton Act, 15 U.S.C. § 14 (1976), by tying the Canteen franchise to each of four separate products: the vending machines involved in the original sale-leaseback arrangement; vending machines subsequently acquired by Garland; food products for resale in the machines; and cigarettes, also for resale in the machines. Second, the plaintiffs asserted that Canteen had made a variety of false representations in order to induce the plaintiffs to enter into the franchise agreement. These were claimed both to amount to common-law fraud and to violate the Texas Deceptive Trade Practices Act, Tex.Bus. & Com.Code Ann. § 17.50. There were three other alleged violations of the DTPA: the tying arrangements described above; Canteen's failure, contrary to representations made before the execution of the franchise agreement, to assume Garland's leases of certain vending equipment; and Canteen's calculation of rentals for vending equipment it leased to Garland from a base figure of 110% of the equipment's cost, when Canteen had told the plaintiffs before the franchise agreement was entered into that Canteen's cost would be the base figure. Next, the plaintiffs claimed that Canteen had on two occasions, once in 1975 and once in 1977, junked vending equipment that Garland owned or had leased. Finally, the plaintiffs sought damages because Canteen allegedly breached the May 5, 1977 audit contract by undervaluing Garland's assets and overvaluing its liabilities. Canteen, as noted above, counterclaimed for the $15,800 that it maintained the plaintiffs owed it under the May, 1977 audit agreement.

C. The Verdict and Judgment.

The case was sent to the jury on special interrogatories--38 or 133 questions, depending on how one counts them. On the tying claims, ¹ the jury found ties of vending machines and cigarettes, but not food; however, the jury found that the ties did not affect a "not insubstantial" amount of interstate commerce. Damages were found to be $10,000. On the plaintiffs' motion for judgment notwithstanding the verdict, the district judge ruled that the jury had obviously been confused by the double negative in the question about the amount of commerce and that the evidence would only support a finding that a not insubstantial amount of commerce had been affected. He therefore entered judgment for the plaintiffs for $10,000, which was automatically tripled. 15 U.S.C. § 15 (Supp. V 1981).

The common-law fraud claim was submitted as a single interrogatory with ninety-six subparts--a grid listing sixteen alleged misrepresentations and asking six questions about each. The jury found for the plaintiffs on seven of the misrepresentations; it assessed actual damages of $37,064 and punitive damages of $135,000.

The jury also found for the plaintiffs on all of the DTPA claims. It awarded $250,000 for the misrepresentations that induced the plaintiffs to enter into the franchise agreement, $10,000 on the tying claim as a DTPA violation, $117,000 for the failure to assume Garland's equipment leases, and $70,000 for the failure to base equipment rental payments on the cost of the equipment rather than 110% of the cost. Each of these amounts was automatically tripled. Tex.Bus. & Com.Code Ann. § 17.50(b)(1) (Vernon 1977) (amended 1979). The jury also awarded the plaintiffs $300,000 for their attorneys' fees. Id.

Each side received damages on its breach-of-contract claim. The plaintiffs were awarded $41,696, but were found to owe Canteen $6560. Finally, the jury found that Canteen had converted vending equipment and that the plaintiffs should receive actual damages of $29,782 for machines they had owned and $3600 for machines they had leased, as well as punitive damages of $65,000.

Canteen moved successfully for judgment notwithstanding the verdict on the conversion claim. At the close of the plaintiffs' case, the district judge had directed a verdict for Canteen on the 1975 conversion claim because the statute of limitations had run. Thus, only the 1977 conversion claim went to the jury. The district judge found, however, that the jury's actual damages awards were clearly based on the plaintiffs' evidence on the 1975 scrapping, since the awards were in the exact amounts claimed for the earlier incident. He further found that the plaintiffs had totally failed to prove damages from the 1977 conversion, and he consequently entered judgment for Canteen. The punitive damages award necessarily fell with the actual damages.

The parties made various post-trial motions attacking the verdict, but except as noted above they were denied. The plaintiffs moved for an award of attorneys' fees on their antitrust claim. See 15 U.S.C. § 15 (Supp. V 1981). The district court granted the motion and determined that $125,000 was an appropriate amount.

Canteen has appealed virtually every aspect of the judgment that favored the plaintiffs, who in turn have cross-appealed the directed verdict and judgment notwithstanding the verdict on the conversion claims. The plaintiffs further object to various evidentiary rulings and instructions that allegedly limited their recovery. Finally, the plaintiffs appeal the district court's refusal to permit a mid-trial amendment to the complaint to plead the Texas-law prerequisites to an award of attorneys' fees on a breach-of-contract claim. We address the parties' claims in no particular order.

II. THE DTPA CLAIMS.

Before a private plaintiff may sue under the DTPA, he must be a "consumer" within the meaning of that statute. Tex.Bus. & Com.Code Ann. § 17.50(a); Cameron v. Terrell & Garrett, Inc., 618 S.W.2d 535, 538 (Tex.1981); Riverside National Bank v. Lewis, 603 S.W.2d 169, 173 (Tex.1980). The definition of "consumer" has, however, been amended several times, so it is important to determine which version applies to a given claim. The general rule is that the governing version is that in force when the allegedly deceptive acts took place. Cameron, supra, 618 S.W.2d at 538 n. 1; Riverside National Bank, supra, 603 S.W.2d at 172; Woods v. Littleton, 554 S.W.2d 662, 665 (Tex.1977). Where the deceptive act is the breach...