Hannigan v. Sears, Roebuck and Co.

• Citation: 410 F.2d 285
• Decision Date: 04 June 1969
• Docket Number: No. 16934.,16934.
• Parties: Thomas M. HANNIGAN and Tru-Han Corporation, Plaintiffs-Appellees, v. SEARS, ROEBUCK AND CO., Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

410 F.2d 285 (1969)

Thomas M. HANNIGAN and Tru-Han Corporation, Plaintiffs-Appellees, v. SEARS, ROEBUCK AND CO., Defendant-Appellant.

No. 16934.

United States Court of Appeals Seventh Circuit.

April 15, 1969.

Rehearing Denied June 4, 1969.

COPYRIGHT MATERIAL OMITTED

Burton Y. Weitzenfeld, Arthur L. Klein, Harvey J. Barnett, Chicago, Ill., for defendant-appellant; Arnstein, Gluck, Weitzenfeld & Minow, Chicago, Ill., of counsel.

Thomas M. Hannigan, Arlington Heights, Ill., Harold L. Jacobson, Richard E. Mueller, Chicago, Ill., for plaintiffs-appellees; Lord, Bissell & Brook, Chicago, Ill., of counsel.

Before DUFFY and HASTINGS, Senior Circuit Judges, and FAIRCHILD, Circuit Judge.

HASTINGS, Senior Circuit Judge.

Defendant Sears, Roebuck and Co. (Sears) appeals from a judgment entered by the district court upon a jury verdict finding Sears to have wrongfully and intentionally interfered with the contractual relationship between Fabricated Products, Inc. (Fabricated) and plaintiffs Thomas M. Hannigan and the Tru-Han Corporation (Tru-Han). Upon the jury's assessment of damages, the court awarded plaintiffs $30,000 in compensatory damages and $90,000 in exemplary damages.

Defendant contends the trial court erred as a matter of law in refusing to grant its motion for a directed verdict on counts 4 and 5 of plaintiffs' complaint which alleged the wrongful interference with plaintiffs' contractual rights.¹ Further, defendant asserts error arising from the trial court's denial of its motion to set aside the verdict and to enter judgment notwithstanding the verdict, or in the alternative, to order a new trial.

In determining whether the trial court properly denied defendant's motions for a directed verdict and for a judgment n. o. v. on counts 4 and 5 of plaintiffs' complaint, we apply the same standards since these motions raise similar questions. Lambie v. Tibbits, 7 Cir., 267 F.2d 902, 903 (1959); Shaw v. Edwards Hines Lumber Co., 7 Cir., 249 F.2d 434, 437 (1957).

It is well established that a motion for a directed verdict or for judgment n. o. v. is properly denied where the evidence is such that reasonable men in a fair and impartial exercise of their judgment may draw different conclusions therefrom. Valdes v. Karoll's, Inc., 7 Cir., 277 F.2d 637, 638 (1960); Smith v. J. C. Penney Company, 7 Cir., 261 F.2d 218, 219 (1958). Thus, the propriety of such denials turns on the determination of whether under the facts, as disclosed by the record, there was sufficient evidence to warrant the submission of the case to the trier of fact. Gunning v. Cooley, 281 U.S. 90, 92-94, 50 S.Ct. 231, 74 L.Ed. 720 (1930); Farmers State Bank of Valparaiso v. Dravo Corporation, 7 Cir., 321 F.2d 28, 39 (1963); Smith v. J. C. Penney Company, supra. In making this determination, we are obliged to view all the evidence, together with all reasonable inferences to be drawn therefrom, in the light most favorable to plaintiffs. Gass v. Gamble-Skogmo, Inc., 7 Cir., 357 F.2d 215, 217 (1966), cert. denied, 384 U.S. 943, 86 S.Ct. 1464, 16 L.Ed.2d 541; McKay v. Upson-Walton Company, 7 Cir., 317 F.2d 826, 828 (1963); Pinkowski v. Sherman Hotel, 7 Cir., 313 F.2d 190, 192 (1963).

Viewing the record in this light, the evidence shows that in May, 1956, plaintiff Tru-Han Corporation was organized under Illinois law by plaintiff Thomas M. Hannigan. Hannigan, a citizen of Illinois, was president of and majority stockholder in Tru-Han. Sears is a New York corporation with its principal place of business in Illinois.

It is undisputed that in 1957, Tru-Han became a distributor of metal outdoor storage buildings manufactured by Fabricated and that in 1958, Hannigan conceived of a new idea for outdoor storage, i. e., an outdoor metal storage cabinet or locker. After negotiations, Hannigan and John Columbini, president of Fabricated, entered into an agreement² on July 17, 1958 whereby Fabricated contracted to manufacture these cabinets exclusively for Hannigan; in consideration thereof, Hannigan agreed to purchase all such outdoor storage cabinets from Fabricated. The contract placed no limitations on Fabricated's right to manufacture and sell its metal outdoor storage buildings, and Fabricated continued to manufacture and to sell such storage buildings to various customers, including defendant Sears and plaintiff Tru-Han.

Pursuant to and in accord with this contract, Hannigan through the Tru-Han Corporation, sold the Fabricated manufactured lawn lockers to its various customers, which included Sears. Sears became a customer in early 1959 and continued to purchase lawn lockers from Tru-Han until September, 1962, at which time Fabricated began to sell lockers directly to Sears and to pay Hannigan a commission of 10% on each sale.

The record reveals that in March, 1959, a buyer for Sears, Brad J. Wakeman, attempted by letter³ to persuade Fabricated's sales manager, Robert Ross, to sell the lawn lockers directly to Sears notwithstanding its exclusive contractual commitment to Hannigan. Sears' avowed purpose for inviting Fabricated into a direct purchasing relationship was to avoid and to eliminate the profit of the middle-man, Tru-Han. Respecting its contractual obligation, Fabricated declined this invitation.

In June, 1960, Harold Crittenden replaced Wakeman as Sears' buyer of utility buildings and lawn lockers and continued to serve in that position until June, 1962. During Crittenden's tenure as buyer for Sears, Fabricated mistakenly sent Sears a Tru-Han invoice which disclosed the basic manufacturing price Hannigan was paying to Fabricated for lawn lockers and utility buildings. This mistake enabled Sears to become aware of the difference between the manufacturing price and the price it was paying for the lawn lockers. As a result, Sears attempted without success to induce Hannigan to lower his sales price on the lockers. On failing to persuade Hannigan to reduce the price, Sears entered into an agreement with Products Engineering Manufacturing Corporation (Pemco) to produce lawn lockers.

While Pemco was able to produce a somewhat differently designed lawn locker at a lower price than plaintiffs' sales price, the Pemco relationship did not provide a satisfactory solution to Sears' problem because Pemco experienced difficulty in filling Sears' orders for lockers. Sears continued to purchase some Fabricated produced lawn lockers from plaintiffs after entering into the Pemco agreement. Pemco went out of business in the fall of 1962.

In June, 1962, John T. Mitchell replaced Crittenden as Sears' buyer of lawn lockers and utility buildings and continued in that capacity until December, 1966.

During July or August of 1962, Mitchell, in an apparent effort to meet Sears' lawn locker needs, attempted to persuade Fabricated to sell lockers directly to Sears. To perfect such an arrangement, Mitchell told Columbini, with full knowledge of Fabricated's exclusive lawn locker contract with Hannigan, that Sears "* * * wanted one supplier of the entire line both utility buildings and lawn lockers, * * *, and if he as president of Fabricated couldn't supply it that way I would have to look to the other people that I was dealing with." There was also testimony Mitchell told Columbini that Fabricated could "make more money" on the sale of the lockers by selling directly to Sears and bypassing plaintiffs.

Mitchell suggested that Columbini work out something with plaintiffs so Fabricated could serve as Sears' source for both lawn lockers and utility buildings.

At the time Mitchell advised Columbini of Sears' plan to purchase lockers and buildings from a common source, Fabricated was in large measure economically dependent upon Sears. Fabricated was selling utility buildings directly to Sears, and 60% of Fabricated's "business was devoted to Sears as a customer." Columbini told Mitchell that "* * * if we lost the Sears business as a result of the single source plan that we couldn't exist. We couldn't continue to make cabinets for Tru-Han or any other customer for that matter."

After talking with Mitchell and learning of Sears' common source purchasing plan, Columbini contacted Hannigan and told him that "* * * we had to make some agreement or understanding with each other with respect to selling these cabinets directly with Sears, * * * otherwise, we would stand a chance of losing the entire line of cabinets and buildings, * * *."

Thereafter, Hannigan did submit to a new arrangement⁴ under which Fabricated would sell lockers directly to Sears and Hannigan would receive a 10% commission on the sale of each such locker. Under this modified arrangement, Sears purchased lockers at a lower price, and Hannigan received significantly less on the sale of each locker.

In substance, plaintiffs alleged that Sears wrongfully and intentionally interfered with their contractual rights by inducing Fabricated to amend its contract with Hannigan and coercing Hannigan into involuntarily agreeing to such amendment.

On appeal, Sears states that, as a matter of law, the contract was not breached but rather "was modified to permit the sales of lockers by Fabricated to defendant in exchange for the payment of commissions to plaintiff Tru-Han * * *." Further, Sears contends that, as a matter of law, the modification was not obtained by coercion. We disagree.

Viewing the facts in the light most favorable to plaintiffs, we find the case was properly submitted to the jury, and the jury could reasonably have found, as it apparently did, that Sears intentionally interfered with plaintiffs' contractual rights with a resulting involuntary modification of the original contract with Fabricated. It follows that the trial court did not err in denying defendant's motions for a directed verdict and judgment notwithstanding the verdict.

Without attempting to assess the jury's reasoning in reaching its verdict, it would not be unreasonable for it to have concluded: that Sears, in an effort to...