Foti Fuels, Inc. v. Kurrle Corp.

• Decision Date: 23 January 2014
• Docket Number: No. 12–195.,12–195.
• Citation: Foti Fuels, Inc. v. Kurrle Corp., 2013 VT 111, 90 A.3d 885 (Vt. 2014)
• Court: Vermont Supreme Court
• Parties: FOTI FUELS, INC. and Robert A. Foti v. KURRLE CORPORATION, Payjack, LLC and James J. Kurrle.

90 A.3d 885

2013 VT 111

FOTI FUELS, INC. and Robert A. Foti

v.KURRLE CORPORATION, Payjack, LLC and James J. Kurrle.

No. 12–195.

Supreme Court of Vermont.

Dec. 13, 2013.

Motion for Reargument Denied Jan. 23, 2014.

Christopher D. Roy of Downs Rachlin Martin PLLC, Burlington, for Plaintiffs–Appellees.

L. Brooke Dingledine of Valsangiacomo, Detora & McQuesten, Barre, for Defendants–Appellants.

Present: REIBER, C.J., DOOLEY, SKOGLUND, BURGESS and ROBINSON, JJ.

REIBER, C.J.

¶ 1.PlaintiffRobert Foti sold most of his fuels business to defendantJames Kurrle and agreed to sell gasoline to defendant through his retained wholesale distributorship.When their business relationship soured after several years, plaintiff sued defendant for one month's nonpayment of gasoline and other claims.Defendant counterclaimed for breach of contract, breach of the covenant of good faith and fair dealing, and violation of the Vermont Consumer Fraud Act (CFA), all arising from his original purchase of plaintiff's business.Defendant now appeals the court's judgments as a matter of law on these counterclaims in favor of plaintiff.We affirm in part and reverse in part.

¶ 2.In 1976, plaintiff began selling and distributing gasoline and other fuels from a facility on Route 2 in Montpelier, Vermont.He formed two corporations to run his business: Foti Fuels, Inc., consisting of an Exxon-branded retail gasoline station, a convenience store, a petroleum bulk storage tank, and a wholesale fuel distributorship supplying retail stations with gasoline; and Foti Fuels Enterprises, Inc., a transportation company that delivered gasoline to other retail stations.In 2000, he offered to sell his business to defendant.Because defendant did not have experience in the fuels industry, the two agreed that plaintiff would train and employ defendant as a manager for several years before executing purchase agreements for the business.Plaintiff expressed that he would move permanently to Arizona after selling his Vermont business, and had already begun to develop a similar business in Tucson.

¶ 3.The parties structured the purchase, which closed on March 1, 2004, pursuant to three agreements.First, an asset-purchase agreement dated November 8, 2003 transferred to defendant nearly all of Foti Fuels' assets, with the primary exception of the wholesale fuel distributorship.Second, a stock-purchase agreement conveyed ownership of Foti Fuels Enterprises, the transportation company, to defendant.Finally, a post-closing agreement outlined the arrangements concerning plaintiff's remaining wholesale fuel distributorship.The post-closing agreement provided that defendant would manage, rent storage space to, and purchase gasoline for his retail station from plaintiff's remaining wholesale distributorship for five years, at which point defendant would have the first opportunity to purchase the distributorship if plaintiff chose to sell it.This way, plaintiff could develop his new business in Arizona while retaining his health insurance through the wholesale distributorship,which had only two customers besides defendant's retail station.

¶ 4.The asset-purchase agreement contained a five-year noncompetition provision for $30,000 in consideration, to be paid in five equal annual installments.The provision prohibited plaintiff from directly or indirectly engaging or taking an interest in “any business which is in competition with the business of [the defendant]” within a ten-mile radius of the acquired operations, whether as an owner, officer, director, employee, or otherwise.The provision similarly barred plaintiff from managing, financing, owning or controlling any interest in a fuels-transportation business in Maine, Vermont, or New Hampshire.Although the asset-purchase agreement indicated that the provision was to survive closing, the parties later executed a separate noncompetition agreement outlining similar, but more specific, terms regarding the prohibited competition.The new agreement prohibited plaintiff from engaging in “any business which is in competition with the business of retail sale of gasoline and/or the operation of a convenience store by [defendant].”The language barring plaintiff's participation in the petroleum-transportation business remained the same in the new agreement.Finally, the new agreement called for the first installment payment on January 1, 2005, one year later than the less-specific noncompetition provision contained in the asset purchase agreement.

¶ 5.Soon after closing, plaintiff's retirement and moving plans were delayed.For several months in 2007 and 2008, plaintiff worked as a salesman and delivery coordinator for Packard Fuels, a retail diesel and home-heating-oil company that delivered its products directly to its customers.Even so, plaintiff appeared to maintain a close business relationship with defendant.Packard would purchase its diesel and home heating oil from plaintiff's wholesale distributorship, which defendant managed, and defendant's transportation company would deliver it to Packard.

¶ 6.The legal dispute between plaintiff and defendant arose from a breakdown of the arrangements established by the five-year post-closing agreement.Coincidentally, this agreement was set to terminate at around the same time that Exxon planned to withdraw from the New England market, which left both plaintiff and defendant scrambling to rebrand their businesses.Before plaintiff could do so, defendant signed an agreement to rebrand with Shell that required him to stop doing business with plaintiff and to purchase gasoline from a competing distributorship, Evans Motor Fuels.At the same time, plaintiff's two remaining customers also decided to end their business with plaintiff in favor of purchasing gasoline from Evans.Finally, defendant agreed to deliver gasoline to plaintiff's former customers through his transportation company.Left without any customers for his distributorship, plaintiff terminated all business relations with defendant.

¶ 7.Both plaintiff and defendant raised claims arising from the termination of their business relationship.Many of these claims were disposed of before trial, and we now limit our analysis only to those three counterclaims by defendant raised in his appeal.¹Defendant's counterclaims are for breach of contract and breach of the covenant of good faith and fair dealing—both of which arise from plaintiff's alleged violation of the noncompetition provision through his employment by Packard Fuels—and for consumer fraud, based on plaintiff's allegedly false promises to move to Arizona, to abide by the noncompetition agreement, and to sell the distributorship to defendant within three to five years.

¶ 8.Plaintiff moved for judgment as a matter of law under Vermont Rule of Civil Procedure 50(a) on these counterclaims after the close of evidence.The trial court granted the motion as to the first two counterclaims and concluded that the defendant failed to establish damages.However, after explaining that it needed more time to research whether the CFA covered the fuels business transactions at issue, the court submitted the CFA counterclaim to the jury.The jury awarded $520,000 in actual damages and $2,000,000 in punitive damages to defendant on the CFA claim.The court, however, granted plaintiff's renewed motion for judgment as a matter of law under Rule 50(b) and vacated the damages award, reasoning that the CFA did not, as a matter of statutory interpretation, cover this fuels business transaction because it did not occur “in commerce” as defined in the CFA.

¶ 9.Defendant appeals the court's order of judgment as a matter of law on the CFA counterclaim, arguing that the court should not have considered plaintiff's motion because plaintiff did not raise the argument that the CFA did not cover the transaction until after trial, and further that the court erred in holding that the transaction was not “in commerce.”Defendant also appeals the court's judgment as a matter of law on the breach of contract and breach of the covenant of good faith and fair dealing counterclaims arising from the noncompetition provision.

I.

¶ 10.We first address defendant's claim that the trial court erred in granting plaintiff's renewed motion for judgment as a matter of law on defendant's CFA claim.We address this argument de novo because the issues it raises are strictly matters of law.State v. Neisner,2010 VT 112, ¶ 11, 189 Vt. 160, 16 A.3d 597.We therefore evaluate it by the same standard that the trial court applied to plaintiff's renewed motion, and consider the evidence “in the light most favorable to the nonmoving party, excluding the effect of modifying evidence.”Vincent v. DeVries,2013 VT 34, ¶ 9, 193 Vt. 574, 72 A.3d 886(quotation omitted).Judgment as a matter of law is appropriate if “there is no legally sufficient evidentiary basis for a reasonable jury to find for that party on that issue.”V.R.C.P. 50(a)(1).We will therefore reverse only where “no evidence exists that fairly and reasonably supports the jury's verdict.”Vincent,2013 VT 34, ¶ 9, 193 Vt. 574, 72 A.3d 886.We conclude, as the trial court did, that the CFA does not apply to this transaction as a matter of law.Because there is no legally sufficient evidentiary basis to support the jury's verdict, we affirm.

A.

¶ 11.As an initial matter, we address defendant's contention that the court improperly considered plaintiff's renewed motion for judgment as a matter of law because, according to defendant, the motion raised a novel issue not presented in plaintiff's original motion under Rule 50(a).A motion for judgment as a matter of law must be made prior to submission of the case to the jury, V.R.C.P. 50(a)(2), and “must specify the judgment sought and the law and facts upon which the moving party relies.”EBWS, LLC v. Britly Corp.,2007 VT 37, ¶ 10, 181 Vt. 513, 928 A.2d 497.These requirements of timely...