Hendry v. Exide Electronics Corp., Nos. 90-15964

CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)
Writing for the CourtBefore CHOY, HUG and RYMER; HUG
Citation974 F.2d 1342
PartiesNOTICE: Ninth Circuit Rule 36-3 provides that dispositions other than opinions or orders designated for publication are not precedential and should not be cited except when relevant under the doctrines of law of the case, res judicata, or collateral estoppel. James HENDRY, an individual doing business as Synergy Sales Engineering, Plaintiff/Appellee/Cross-Appellant, v. EXIDE ELECTRONICS CORPORATION, a North Carolina corporation, Defendant/Appellant/Cross-Appellee.
Docket NumberNos. 90-15964,90-16148
Decision Date27 May 1993

Page 1342

974 F.2d 1342
NOTICE: Ninth Circuit Rule 36-3 provides that dispositions other than opinions or orders designated for publication are not precedential and should not be cited except when relevant under the doctrines of law of the case, res judicata, or collateral estoppel.
James HENDRY, an individual doing business as Synergy Sales
Engineering, Plaintiff/Appellee/Cross-Appellant,
EXIDE ELECTRONICS CORPORATION, a North Carolina corporation,
Nos. 90-15964, 90-16148.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted May 12, 1992.
Decided Sept. 8, 1992.
Motion to Recall and Clarify Mandate Granted
Jan. 29, and May 27, 1993.

Appeal from the United States District Court for the Northern District of California, No. C-89-0077 SAW; Stanley Weigel, District Judge, Presiding.



Before CHOY, HUG and RYMER, Circuit Judges


This case involves a dispute between Exide Electronics Corporation ("Exide"), a manufacturer of electrical equipment including uninterruptible power supply ("UPS") systems and James Hendry, its former sales representative doing business as Synergy Sales Engineering ("Hendry" or "Synergy"). Exide appeals from a $14.9 million judgment entered on a general verdict for Hendry. 1 Hendry cross-appeals from the district court's denial of his request for attorney's fees on the basis of Exide's alleged bad faith conduct before and during the litigation and requests review of the district court's jury instruction concerning punitive damages. Because we find that the district court erred as a matter of law in instructing the jury that North Carolina law implies a duty of good faith in the termination of an at-will employee and that Exide could not terminate Hendry in bad faith in order to avoid paying him commissions, we reverse.


Hendry's claims are based on Exide's alleged breach of two contracts, the Power Systems Agreement for Fiscal Year 1987 (the "Rep Agreement") and an oral agreement that Hendry contends he and Exide entered into sometime in late December 1986 or early January 1987. 2

The written Rep Agreement executed by Exide and Hendry expressly superseded all prior contracts between the parties regarding UPS sales, and authorized Synergy to sell Exide UPS products in Northern California and most of Nevada. Synergy's performance under the contract was to be measured according to the volume and mix of products it sold. The Rep Agreement provided that it would expire automatically and without notice after one year, but also provided that either party could terminate the agreement without cause on 120 days notice. 3 The agreement specifically contemplated payment of post-termination commissions. It set out a procedure for calculating those commissions whereby, after Hendry received a termination notice, the parties would negotiate a list of the pending UPS projects that Hendry was soliciting at the time he was terminated ("protect list"). If during the 120-day notification period any of those projects on the protect list resulted in "an acceptable purchase order delivered to Exide," Synergy was entitled to payment of the appropriate commission for that project. Id. at p I(9) (the "post-termination compensation provision").

On March 2, 1987 Exide invoked the without cause termination clause and terminated Synergy. The parties subsequently exchanged and negotiated lists of Synergy's pending UPS projects.

In addition, and while the Rep Agreement was still in effect, Hendry claims that he entered into an oral agreement with Philip Tompkins, Exide's Vice President for Domestic Sales. Exide disputes that any oral agreement ever was made. According to Hendry, sometime in late December 1986 Tompkins phoned him. During that call he claims that they agreed that Exide would pay him a reduced 30% commission on the $1 million UPS contract that Exide was awarded in October 1986 for Warner-Robbins Air Force Base ("Warner-Robbins contract") in exchange for a 100% commission (less destination credit if the shipment was outside Synergy's assigned territory), on all future UPS projects out of McClellan Air Force Base ("McClellan"). They also agreed that Exide would cooperate fully with and support Synergy's representatives at McClellan and that Exide would coordinate a meeting among Exide, Synergy, and McClellan.

On January 13, 1987 and February 12, 1987 Hendry wrote and sent two identical letters to Tompkins. Both letters reiterated the terms discussed during the alleged telephone call and contained no additional terms. Exide maintains that no one at Exide wrote back to Hendry or confirmed his understanding as set forth in these letters.

The heart of Hendry's case is that Exide acted in bad faith when it terminated him as its sales representative in order to avoid paying commissions he was entitled to in connection with three UPS contracts: a $621 million five-year Air Force UPS requirements contract that was solicited out of the Air Logistics Center at McClellan (the "ALC contract"); 4 the sale of UPS equipment to GTE Government Systems; 5 and OEM sales made in Hendry's territory. 6 Exide disputes that it terminated Hendry to deny him commissions and contends that he was terminated because of his poor sales performance in the western region.


The question presented in this appeal involves interpretation of North Carolina law. We review the district court's state law determinations de novo and its determinations of the applicable state law are not entitled to any deference. Salve Regina College v. Russell, 111 S.Ct. 1217, 1221-25 (1991); see In re McLinn, 739 F.2d 1395, 1403 (9th Cir.1984) (en banc).


A. General Verdict

Hendry contends that the judgment below must be upheld if it can be supported on any theory properly presented to the jury and argues that, because Exide failed to challenge the fraud verdict and it was properly presented to the jury, under this rule the court should affirm the judgment on the basis of that claim. Kern v. Levolor Lorentzen, Inc., 899 F.2d 772, 777 (9th Cir.1990); Begnini v. City of Hemet, 879 F.2d 473, 478 (9th Cir.1988); Roberts v. College of The Desert, 870 F.2d 1411, 1417 (9th Cir.1988). Exide responds that we must reverse the general verdict if any one theory of liability improperly was presented to the jury and argues that we should not apply the narrow exception articulated in the decisions cited by Hendry in this case.

The general rule in this Circuit is that "a general jury verdict will be upheld only if there is substantial evidence to support each and every theory of liability submitted to the jury." Kern, 879 F.2d at 777 (quotation & citations omitted). This rule is in accord with a long line of precedent in which the Supreme Court has held that, when faced with a general verdict where "upon any one issue error was committed, either in the admission of evidence, or in the charge of the court [such a general] verdict cannot be upheld...." City of Columbia v. Omni Outdoor Advertising, Inc., 111 S.Ct. 1344, 1356 (1991); Sunkist Growers, Inc. v. Winckler & Smith Citrus Prods. Co., 370 U.S. 19, 29-30 (1962); United New York & New Jersey Sandy Hook Pilots Ass'n v. Haleki, 358 U.S. 613, 619 (1959); Maryland v. Baldwin, 112 U.S. 490, 493 (1884).

Despite this general rule, in our discretion, we may "construe a general verdict as attributable to one of several theories if it was supported by substantial evidence and was submitted to the jury free from error." Kern, 899 F.2d at 777. 7 In deciding whether it to exercise this discretion, however, the factors we must consider are: (1) the potential for confusion of the jury that may have resulted from erroneous submission of a particular claim or cause of action; (2) whether the losing party's defenses apply to the count upon which the verdict is being sustained such that they would have been considered by the jury with reference to that count; (3) the strength of the evidence supporting the count being relied on to sustain the verdict; and, (4) the extent to which the same disputed issues of fact apply to the various legal theories. Traver v. Meshriy, 627 F.2d 934, 938 (9th Cir.1980); Kern, 899 F.2d at 777.

We balance these factors in an ad hoc manner, without any one factor being accorded particular weight and without necessarily considering all four factors in each case. See, e.g., Beningi, 879 F.2d at 478 (exercising discretion on basis of strong evidence of two factors); Syufy, 793 F.2d at 1002 (reversing and refusing to exercise discretion on poor showing of only two factors).

Hendry urges us to affirm the general verdict under the Traver exception arguing that the fraud theory properly was submitted to the jury and that there was substantial evidence to support that theory of liability. We conclude that the Traver exception is not applicable in this case and decline to exercise our discretion.

Only two of our opinions have considered the potential for jury confusion as a significant factor in applying the Traver factors. In Syufy Enterprises we noted that the potential for jury confusion "was great" because the case was complex, involved multiple antitrust theories, and each claim involved distinctive factual and legal components. Id. at 1001-02. In Kern, although the jury improperly was instructed on an age discrimination claim, we concluded that the jury was unlikely to be confused because Kern's counsel had stressed the properly presented contract claim in closing argument and the age discrimination claim only presented as a possible ground for the defendant's disparate treatment of Kern and never was offered as an independent ground for recovery. Kern, 899 F.2d at 777.

This case, like Syufy and Counts v. Burlington Northern Railroad, 952 F.2d 1136 (9th Cir.1991), involved five theories upon which Hendry sought recovery, each involving...

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