Dwight's Discount Vacuum Cleaner City, Inc. v. Scott Fetzer Co.

• Decision Date: 28 November 1988
• Docket Number: No. 87-1939,87-1939
• Citation: 860 F.2d 646
• Parties: DWIGHT'S DISCOUNT VACUUM CLEANER CITY, INC., Plaintiff-Appellee, v. The SCOTT FETZER COMPANY, Kirby Company Division, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 646

860 F.2d 646

DWIGHT'S DISCOUNT VACUUM CLEANER CITY, INC., Plaintiff-Appellee, v. The SCOTT FETZER COMPANY, Kirby Company Division, Defendant-Appellant.

No. 87-1939.

United States Court of Appeals Fifth Circuit.

Nov. 28, 1988.

Rehearing Denied Jan. 30, 1989.

Beverly Willis Bracken, Steve L. Moody, Naman, Howell, Smith & Lee, Waco, Tex., for defendant-appellant.

Merrilee L. Harmon, Charles M. McDonald, Waco, Tex., for plaintiff-appellee.

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

Before REAVLEY, JOHNSON, and JONES, Circuit Judges.

EDITH H. JONES, Circuit Judge.

Defendant Scott Fetzer Co., Kirby Co. Division ("Kirby"), appeals a judgment and jury verdict rendered against Kirby for alleged violations of the Texas Deceptive Trade Practices and Consumer Protection Act. Judgment was awarded to plaintiff Dwight's Discount Vacuum Cleaner City ("Dwight's") in the amount of $28,470, plus $2,000 in additional damages and $89,000 in attorneys' fees. Finding this judgment to be in error, we reverse and render judgment for defendant Kirby.

I.

Dwight Krzywonski, owner of Dwight's Discount Vacuum Cleaner City, operates a store where he sells vacuum cleaners and other appliances at discount prices. One of the brands of new vacuum cleaners that Dwight's sells is the Kirby line of vacuums.

Dwight's acquires its Kirby vacuum cleaners from Kirby distributors. In selling to Dwight's, however, the Kirby distributors violate their distributorship agreements with Kirby because Kirby's marketing system is organized exclusively on direct in-home sales. Any sales a distributor makes to Dwight's, if discovered by Kirby, could lead to Kirby's immediate termination of its distributor agreement with the offending distributor. Dwight's has successfully persuaded a number of distributors to ignore their agreements with Kirby through promises that Kirby would never find out about these forbidden sales transactions. Dwight's attracts distributors by such methods as agreeing to efface serial numbers from the machines and agreeing to fill out warranty cards as if individual consumers had purchased the vacuums directly from the distributors after an in-home demonstration. Kirby refers to such deceptive activities on Dwight's part as "bojacking."

Carol Weeks was a Kirby distributor in Spokane, Washington. In June 1986, Weeks agreed to begin employment as a distributor for Viking Vacuum Cleaner Co. Despite her new employment and despite Kirby's prohibition against dual distributorships, Weeks ordered from Kirby 120 vacuum cleaners and shampoo attachments on June 13, 1986. Kirby shipped the merchandise on June 16, 1986, and the 120 units arrived at a warehouse in Spokane on June 26, 1986. In the meantime, Weeks contacted Dwight's and offered to sell the store these 120 units at $75 above cost or about $38,000. Weeks made this offer in disregard of her obligation under the distributorship agreement to sell Kirbys only to individuals through the in-home sales program. Dwight's agreed to the terms of the sale and arranged to pay for the merchandise by means of two cashier's checks. Dwight Krzywonski arrived in Spokane on July 1, 1986 and presented Weeks with the two cashier's checks, one in the amount of $28,740 and the other for $9,000. Krzywonski and Weeks proceeded to the Bank of Spokane, which held the original bill of lading on the 120 vacuums. Weeks delivered the $28,740 cashier's check to the bank, and the bank released the bill of lading on the 120 Kirbys.

In the meantime, Kirby learned that Weeks was attempting to sell the 120 vacuums to the retailer Dwight's. Kirby also learned that Weeks had abandoned the office from which she had conducted her business as a Kirby distributor. Since Kirby believed it was entitled to reclaim the 120 vacuum cleaners, Kirby contacted the warehouse and requested that the merchandise not be released. Due to the contested title, the warehouse agreed to not release the vacuum cleaners.

After stopping shipment of the units, Weeks' superiors at Kirby delivered a letter at Weeks' last-known office and in the letter terminated the distribution agreement. Kirby cited as reasons for Weeks' termination her attempted sale of the 120 vacuums to Dwight's and her vacating her office without notice to Kirby.

Shortly thereafter, Kirby sued Weeks and Dwight's in Washington and Ohio. Dwight's sued Kirby in federal district court in Texas, alleging tortious interference with contract, conversion, and unconscionable acts violative of the Texas Deceptive Trade Practices Act. Kirby moved for a change of venue in the Texas action, but the district court denied the motion. Kirby next sought a writ of mandamus from the Fifth Circuit. This Circuit refused to grant Kirby's writ. In October 1986, Kirby deposited in the registry of the court in Washington the $28,740 that it had received from the Bank of Spokane for the 120 vacuum cleaners.

Prior to trial in Texas, Kirby filed a counterclaim against Dwight's for tortious interference with the distributorship agreement between Kirby and Weeks. Also before trial, Weeks returned to Dwight's the $9,000 she had received as her payment for the 120 units. At trial, a jury found that Kirby had not interfered with the contract between Dwight's and Weeks and that it had not converted property belonging to Dwight's. The jury did find, however, that Kirby had committed unconscionable acts under the Texas DTPA and awarded Dwight's $28,740 in actual damages and $89,000 in attorneys' fees. Although the jury found for Kirby on the counterclaim, it awarded no damages. The court accordingly entered judgment for Dwight's in the amount of $28,740 as actual damages, $2,000 in extra damages, and $89,000 in attorneys' fees.

Kirby alone appeals, challenging the jury verdict and judgment under the Texas DTPA. Kirby argues that under Texas law Dwight's is not a consumer for DTPA purposes or, alternatively, if Dwight's is a consumer, Kirby has not committed any unconscionable acts violative of the DTPA.

II.

Appellant Kirby properly preserved its objections to the sufficiency of the evidence by means of a motion for judgment notwithstanding the verdict. We review the trial court's denial of this motion under the standard set forth in Boeing Co. v. Shipman, 411 F.2d 365, 374-75 (5th Cir.1969):

The Court should consider all of the evidence--not just that evidence which supports the non-mover's case--but in the light and with all reasonable inferences most favorable to the party opposed to the motion. If the facts and inferences point so strongly and overwhelmingly in favor of one party that the Court believes that reasonable men could not arrive at a contrary verdict, granting of the motions is proper. On the other hand, if there is substantial evidence opposed to the motions, that is, evidence of such quality and weight that reasonable and fair-minded men in the exercise of impartial judgment might reach different conclusions, the motions should be denied, and the case submitted to the jury. A mere scintilla of evidence is insufficient to present a question for the jury. The motions for directed verdict and judgment n.o.v. should not be decided by which side has the better of the case, nor should they be granted only when there is a complete absence of probative facts to support a jury verdict. There must be a conflict in substantial evidence to create a jury question.

Judged by this standard, the evidence in the record does not support the conclusion that Kirby's actions were unconscionable as the Texas DTPA defines the concept of "unconscionability."

Section 17.50 of the Texas Deceptive Trade Practices and Consumer Protection Act provides:

(a) A consumer may maintain an action where any of the following constitute a producing cause of actual damages:

(3) any unconscionable action or course of action by any person

Tex.Bus. & Com.Code Ann. Sec. 17.50 (Vernon's 1987). Texas courts have held that one must be a consumer to maintain a private cause of action for damages and attorney's fees under this section of the Act. Knight v. International Harvester Credit Corp., 627 S.W.2d 382, 388 (Tex.1982); Riverside National Bank v. Lewis, 603 S.W.2d 169, 173 (Tex.1980); Martin v. Lou Poliquin Enterprises, Inc., 696 S.W.2d 180, 183 (Tex.App.--Houston [14th Dist.] 1985, writ ref'd n.r.e.). The statute itself defines "consumer" to include "an individual, partnership, [or] corporation ... who seeks or acquires by purchase or lease any goods or services." Tex.Bus. & Com.Code Ann. Sec. 17.45(4). A plaintiff establishes standing as a consumer in terms of his relationship to the transaction, and not by contractual relationship with the defendant. The only requirement is that the goods or services sought or acquired must form the basis of the plaintiff's complaint. Flenniken v. Longview Bank & Trust Co., 661 S.W.2d 705, 707 (Tex.1983); Cameron v. Terrell & Garrett, Inc., 618 S.W.2d 535, 539 (Tex.1981).

In the instant case, Kirby contends that Dwight's failed to plead consumer status and, therefore, Dwight's should be barred from recovery under the DTPA. Dwight's, however, did allege a cause of action under the DTPA. We have been unable to locate any Texas case holding in circumstances like these that Dwight's was a DTPA "consumer" vis-a-vis Kirby. We may, however, assume arguendo that he satisfied this test because the second issue which...