Doctor's Associates, Inc. v. Weible
| Decision Date | 12 August 1996 |
| Docket Number | D,1408,Nos. 1279,s. 1279 |
| Citation | 92 F.3d 108 |
| Parties | DOCTOR'S ASSOCIATES, INC. and Franchise World Headquarters, Inc., Plaintiffs-Appellants, Cross-Appellees, v. John M. WEIBLE, Defendant-Appellee, Cross-Appellant. ockets 95-7936, 95-7938. |
| Court | U.S. Court of Appeals — Second Circuit |
Mark R. Kravitz, Wiggin & Dana, New Haven, CT, for Plaintiffs-Appellants, Cross-Appellees.
David Duree, Reinert & Duree, P.C., St. Louis, MO (Nicholas Wocl, Tooher, Puzzuoli & Wocl, Stamford, CT, of counsel), for Defendant-Appellee, Cross-Appellant.
Before MINER, McLAUGHLIN, and LEVAL, Circuit Judges.
Plaintiffs appeal from an order of the United States District Court for the District of Connecticut (Gerard L. Goettel, Judge ), denying their motion for judgment notwithstanding the verdict after a jury found them liable for abuse of process under Connecticut law. Defendant cross-appeals from the district court's order reducing the jury's compensatory damages award to him on his counterclaim.
Plaintiff Doctor's Associates, Inc. ("DAI") is the national franchisor of Subway sandwich shops. It is a Florida corporation with its principal place of business in Florida. The other plaintiff is Franchise World Headquarters, Inc. ("FWHI"), a corporation that provides administrative services to DAI and is located in Connecticut.
In 1988, Defendant John Weible bought a Subway franchise in California. As part of his purchase agreement, Weible entered into a standard franchise contract with DAI; and he also subleased his store premises from Subway Sandwich Shop, Inc. ("SSS"), one of DAI's affiliated leasing companies.
The franchise agreement contained one of DAI's standard arbitration clauses, calling for arbitration of "[a]ny controversy or claim arising out of or relating to this contract." The arbitration would take place "in Bridgeport, Connecticut, or whichever city in which [DAI] is then headquartered." Weible's sublease for the shop contained a "cross-default provision," which allowed the sublessor, SSS, to bring an eviction action against Weible if he breached the franchise agreement with DAI.
A dispute arose between DAI and Weible over his right to buy a second Subway franchise for a reduced franchise fee. Weible stopped paying royalties to DAI, allegedly under a clause in the franchise agreement permitting the franchisee to withhold payment in the event of default by DAI.
SSS, as lessor of the California shop, filed an eviction action against Weible in California state court. Weible appeared pro se, but then failed to file an answer; and a default judgment was entered against him in California.
Weible, still pro se, then sued DAI for more than $26 million in California state court, alleging numerous common law violations in connection with his franchise agreement. Pursuant to the arbitration clause in the franchise agreement, the California court stayed the action to allow the parties to arbitrate.
Weible then filed a demand for arbitration with the American Arbitration Association In January 1992, while Weible's California lawsuit and arbitration demand were pending, officials at DAI and FWHI detected that someone had gained unauthorized access to the voice mailboxes of Frederick Deluca, the President of DAI, and Leonard Axelrod, Vice-President and Chief In-House Counsel for DAI and FWHI. Their suspicions had been aroused when they learned that a ribald message, left by a co-worker on Axelrod's voice mailbox, had been transferred to the voice mailbox of another employee, and subsequently "shared" with other co-workers. Shaken by the security breach, the companies conducted an investigation, which led them to point the finger at Weible.
against DAI, seeking $800,000 in compensatory damages and $30 million in punitive damages.
Axelrod allegedly threatened Weible that, unless he abandoned both his arbitration and his California lawsuit against DAI, DAI and FWHI would pursue claims against him for the voice mail "break-in." Weible refused to drop his claims.
DAI sought permission from the arbitrators to add a counterclaim against Weible in the pending arbitration, based on the alleged intrusions into its voice mail system. The arbitrators denied DAI's request, finding that the counterclaim was not covered by the arbitration clause in the franchise agreement.
In the meantime, DAI and FWHI filed a damage action against Weible, in the United States District Court for the District of Connecticut, alleging violations of the Oral Communications Act, 18 U.S.C. § 2510 et seq., and the Stored Wire and Electronic Communications and Transactional Records Access Act, 18 U.S.C. § 2701 et seq. Weible counterclaimed for common law abuse of process under Connecticut law, claiming that Plaintiffs filed the federal suit solely to strong-arm him into settling or dropping his arbitration demand and his California lawsuit.
DAI and FWHI moved to dismiss the counterclaim for failure to state a claim, pursuant to Federal Rule of Civil Procedure 12(b)(6). They argued that because Weible's counterclaim stated that the abuse of process occurred upon the mere filing by Plaintiffs of their complaint, the counterclaim was really a claim for malicious prosecution (or, as it is quaintly called in Connecticut, vexatious litigation) and, as such, that it lacked an essential element of that tort--namely termination of the lawsuit in Weible's favor.
The motion was referred to a magistrate judge (Joan Glazer Margolis, Magistrate Judge ), who recommended that the motion to dismiss be denied. The district court (T.F. Gilroy Daly, Judge ) endorsed that recommendation. The case was then transferred to another district judge (Gerard L. Goettel, Judge ), and proceeded to trial.
In the midst of these federal proceedings, the arbitrators awarded Weible $219,900 on all his arbitration claims. DAI paid the award in full.
DAI and FWHI introduced telephone records demonstrating that, during the seven months between July 1, 1991 and January 31, 1992, about 900 phone calls (aggregating about 124 hours) were made from Weible's home telephone to the toll-free number that, by use of confidential access codes, provides outside access to Plaintiffs' voice mail system. Weible had no business relationship with either DAI or FWHI during that seven-month period.
There was further evidence that, after Plaintiffs learned of the alleged security breach of their voice mail system, they changed the security codes for Axelrod's and DeLuca's voice mailboxes. In the twenty-four hours after the change, 105 calls were made from Weible's home telephone to the toll-free voice mail number. According to computer records, the majority of those calls corresponded to possible unsuccessful attempts to "hack" into the DeLuca and Axelrod mailboxes during the same period.
At trial, Weible presented the following evidence on his counterclaim: (1) Axelrod conceded that DAI and FWHI pursued charges against Weible, but not against another employee who also had gained unauthorized
access to the voice mail system, because Weible had filed a suit against DAI and the other employee had not; (2) before Plaintiffs filed this lawsuit, Axelrod allegedly threatened to bring an action against Weible unless he withdrew his claims against DAI; and (3) Plaintiffs sought to recover only a nominal sum from Weible in this action, but spent a much larger fortune pursuing their claims ( that their motive was pure harassment).
At the close of all the evidence, Plaintiffs moved for a directed verdict on the counterclaim. See Fed.R.Civ.P. 50(a). The district court denied the motion, and submitted all the claims and the counterclaim to the jury.
The jury found for Weible on both Plaintiffs' voice mail claims and on Weible's counterclaim, and on the latter awarded him $95,000 in compensatory damages and $115,000 in punitive damages.
Plaintiffs moved for judgment notwithstanding the verdict on the counterclaim. See Fed.R.Civ.P. 50(b). In the alternative, they asked the court to reduce the damages award.
The court denied Plaintiffs' Rule 50(b) motion, but granted their alternative motion by reducing the compensatory damages from $95,000 to $56,556. Doctor's Assocs. v. Weible, No 3:92-CV-574 (GLG), slip op. at 2 (D.Conn. Aug. 8, 1995).
DAI and FWHI appeal, arguing that the court erred by failing to grant their motion for judgment non obstante veredicto ("judgment n.o.v.") on Weible's counterclaim. (They do not appeal the jury's verdict for Weible on their voice mail claims.) Weible cross-appeals, arguing that the district court should not have reduced the jury's compensatory damages award.
The primary issue in this appeal is whether Weible presented sufficient evidence at trial to permit a rational jury to find in his favor on his abuse of process counterclaim. A careful review of the record compels us to conclude that Weible did not (and, in any event, could not) present evidence sufficient to prevail on this claim under Connecticut law. Thus, we reverse the district court's denial of Plaintiffs' judgment n.o.v. motion, and remand with instructions to enter judgment for Plaintiffs on the counterclaim.
We begin with a procedural nicety. There are no more motions for a directed verdict or judgment n.o.v. Federal Rule of Civil Procedure 50 still "governs the procedure for removing a judgment from the verdict-winner by the use of either a motion for a directed verdict, Rule 50(a)[,] or a motion for judgment notwithstanding the verdict, Rule 50(b)." Samuels v. Air Transp. Local 504, 992 F.2d 12, 14 (2d Cir.1993). As of December 1, 1991, however, the hoary terms "judgment notwithstanding the verdict" and "directed verdict" were forsaken. Id. Now, both pre-verdict and post-verdict motions under Rule 50...
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