Excel Handbag Co., Inc. v. Edison Bros. Stores, Inc.

• Decision Date: 14 November 1980
• Docket Number: No. 78-1326,78-1326
• Citation: 630 F.2d 379
• Parties: 1980-81 Trade Cases 63,741, 7 Fed. R. Evid. Serv. 70 EXCEL HANDBAG CO., INC., etc., Plaintiff-Appellant, Cross-Appellee, v. EDISON BROTHERS STORES, INC., etc., Defendant-Appellee, Cross-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 379

630 F.2d 379

1980-81 Trade Cases 63,741, 7 Fed. R. Evid. Serv. 70

EXCEL HANDBAG CO., INC., etc., Plaintiff-Appellant, Cross-Appellee, v. EDISON BROTHERS STORES, INC., etc., Defendant-Appellee Cross-Appellant.

No. 78-1326.

United States Court of Appeals Fifth Circuit.

Nov. 14, 1980.

Joe N. Unger, Miami, Fla., for plaintiff-appellant, cross-appellee.

Calvin F. David, N. James Turner, Miami, Fla., for defendant-appellee, cross-appellant.

Appeals from the United States District Court for the Southern District of Florida.

Before RONEY, HILL and FAY, Circuit Judges.

FAY, Circuit Judge:

In an action for breach of contract, arising out of appellee's alleged failure to pay for certain goods, appellant received a jury award of $110,810.56, as compensatory damages. Appellant appeals the trial court's directed verdict for appellee on the question of punitive damages. Appellee cross-appeals with respect to the trial court's statements of law on commercial bribery as a defense in contract actions and on the waiver of that defense. Appellee also asserts error in the trial court's dismissal of the third-party defendant and the directed verdict against its antitrust counterclaim. We reverse and remand on the issue of punitive damages, reverse the failure to grant appellant's motion for a directed verdict on appellee's commercial bribery defense, and affirm the judgment in all other respects.

THE FACTS

Plaintiff-appellant, Excel Handbag Co., Inc. (Excel), manufactures women's handbags. Defendant-appellee, Edison Brothers Stores, Inc. (Edison), purchases handbags from Excel, as well as other manufacturers, and resells them through its chain of retail stores. ¹ Excel and Edison enjoyed harmonious business relations for twenty-five years, until this litigation arose.

The central character in this story is Joseph Fingerhut (Fingerhut), a former employee of Edison. Fingerhut was responsible, with one other individual, for purchasing all of Edison's handbag requirements. He was accountable for his purchases only to Bert Talcoff, an Edison vice-president and the director of Edison's merchandise division.

In the spring of 1976, Edison undertook an investigation into certain allegations that Fingerhut had accepted bribes from some or all of the vendors from whom he purchased handbags. The investigation was conducted primarily by Herbert Robinson (Robinson), an attorney having considerable expertise in such matters. The investigation resulted in an indication that many of the manufacturers from whom Edison purchased goods were paying Fingerhut kickbacks, based on either a percentage of the total sale or a fixed price per dozen handbags. The only evidence uncovered with respect to Excel was (1) that its president, Marvin Fink (Fink), who allegedly was known as a "kickback artist," had thrown a number of $100 bills into the air during a meeting with an unknown party and said, "I'm going to St. Louis," ² and (2) that Fingerhut allegedly admitted receiving five-hundred dollars from Fink "occasionally" "around Christmastime."

The alleged statement that Fink gave Fingerhut five-hundred dollars occasionally around Christmastime came at a meeting between Fingerhut, Robinson, and Julian Edison on May 10, 1976. ³ At that time, Excel was in the process of filling an order for Edison having a total sales price of approximately $110,000. ⁴ Excel also had shipped $43,831.50 worth of goods to Edison's warehouse, where it was kept in storage. ⁵

Upon discovery of what it thought to be widespread bribery between Fingerhut and a number of its suppliers, Edison took the position that it would not continue doing business with any of them until they had cleared themselves of all allegations. ⁶ In Excel's case, this meant that Edison would place no more orders and would not pay for the Count I goods, until Excel cleared itself. As the existence of this action indicates, Excel was unable to clear itself to Edison's satisfaction. Fink had a number of conversations with Robinson and other Edison officials involved in the investigation, in which he denied that he or his company ever gave bribes, money, or gifts to any Edison employee. He offered to sign an affidavit so stating. Fink was not willing, however, to comply with Robinson's request that he submit to a polygraph examination. Robinson, in turn, refused to give Excel clearance until Fink would agree to take the test.

The facts surrounding the Count III goods are quite different. ⁷ They were ordered on May 7, 1976, and were to be invoiced on July 5, 1976. Sometime around July 5, 1976, ⁸ Robinson called Bernard Mandler (Mandler), counsel for Excel, and indicated Edison's intention to take legal possession of the Count III goods on the date that they originally were to have been invoiced. Mandler responded that Excel would not relinquish title to those goods unless Edison agreed to pay for the Count I goods as well as the Count III goods. Robinson testified that he responded, "I told Mandler that Edison would pay for the goods...." ⁹ Robinson then called Eric Newman (Newman), an executive vice-president and the secretary of Edison, and explained Excel's position that the Count III goods were not to be taken down ¹⁰ until the Count I goods were paid for. Robinson advised Newman to pay for the Count III goods, and Newman agreed. The Count I goods were not paid for, and Excel did not relinquish title to the Count III goods by invoicing them. Nonetheless, on July 6, 1976 the Count III goods were taken down by Edison. The next day, Robinson called Mandler to inform him that the Count III goods had been taken down and that Edison intended to pay for them. Payment was not forthcoming, however, and when Robinson received a copy of the complaint in this case, on July 28, 1976, he telephoned Newman and told him payment needed to be made. ¹¹ Newman telephoned Miller Walton (Walton), Edison's attorney in Florida, and informed him that Edison was forwarding a check to him in an amount equal that due Excel for the Count III goods. Newman further testified that he instructed Walton to tender the check to Excel. Walton received the check, dated August 17, 1967, some three weeks after that conversation. Walton tendered the check to Mandler, on the condition that payment would not be made unless Excel agreed to dismiss its claim for punitive damages in the present action. ¹² Mandler rejected the tender so conditioned. As of the time of trial, in September of 1977, none of the goods had been paid for.

PUNITIVE DAMAGES

Excel's only contention on appeal is that the trial court erred in granting Edison's motion for a directed verdict on Excel's claim for punitive damages. Excel asserts that sufficient evidence was introduced to create a question of fact for the jury concerning the willful, wanton, and malicious character of Edison's conduct with respect to the Count III goods. For the reasons indicated below, we agree that the issue was one for the jury.

The initial issue is whether a federal District Judge deciding if there is sufficient evidence to create a jury question should use the sufficiency of evidence test of the state in which the court is located or the federal test. We start with the proposition that in diversity actions, such as this, federal courts are required to apply the substantive law of the jurisdiction in which the district court hearing the case is located. Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). This Court uniformly has held, however, that the federal rather than the state test should be applied to determine if there is sufficient evidence to create a jury question because the issue is one of procedural rather than substantive law. Kicklighter v. Nails by Jannee, Inc., 616 F.2d 734, 738 (5th Cir. 1980) (en banc).

The test in this Circuit for deciding the appropriateness of a directed verdict is that it should not be granted if a reasonably minded jury could arrive at a verdict other than that sought by the party requesting the directed verdict. Id.; Cora Pub, Inc. v. Continental Gas Co., 619 F.2d 482, 484 (5th Cir. 1980). In making that determination, the evidence must be considered as a whole and viewed in a light most favorable to the party opposing the directed verdict. Id. A directed verdict is not limited to those situations in which there is a complete absence of probative facts to support a jury verdict. It is also warranted when there is no conflict in substantial evidence. Broad v. Rockwell International Corp., 614 F.2d 418, 425 (5th Cir. 1980). Applying this standard to the present action, the trial court concluded that Excel had failed to establish sufficient evidence of willful, wanton, or malicious conduct to create a jury question as to punitive damages, and, accordingly, directed a verdict for Edison on that count.

Our first step in reviewing the trial court's conclusion ¹³ is to determine what is required under Florida law to justify the award of punitive damages. Recent decisions of the Florida Supreme Court and other Florida courts clearly state that punitive damages are not to be awarded in an action for breach of contract unless the breach also constitutes an independent tort. Butchikas v. Travelers Indem. Co., 343 So.2d 816, 817 n. 2 (Fla.1977); American International Land Corp. v. Hanna, 323 So.2d 567, 569 (Fla.1976); Griffith v. Shamrock Village, 94 So.2d 854, 858 (Fla.1957). An independent tort must be specifically pled. Roger Lee, Inc. v. Trend Mills, Inc., 410 F.2d 928, 929 (5th Cir. 1969). Moreover, the party seeking punitive damages must establish that the tort was committed willfully, wantonly, maliciously, or with conscious disregard for the legal rights of the injured party. American International Land Corp., supra; Griffith, supra.

There is no doubt that an independent tort was both pled and established in the present action. The trial court directed a verdict for Excel on its Count III for...