Kenda Corp., Inc. v. Pot O'Gold Money Leagues

• Decision Date: 19 May 2003
• Docket Number: No. 01-2493.,No. 01-2577.,No. 01-2576.,01-2493.,01-2576.,01-2577.
• Citation: 329 F.3d 216
• Parties: KENDA CORPORATION, INC. d/b/a Pot O'Gold Pool League, Plaintiff, Appellee/Cross-Appellant, David Rischitelli Plaintiff, Appellee, v. POT O'GOLD MONEY LEAGUES, INC., Jeffrey L. Germain, and David R. Kratze, Defendants, Appellants/Cross-Appellees, Kenneth J. PERRY and D.F. Lete, Defendants.
• Court: U.S. Court of Appeals — First Circuit

Page 216

329 F.3d 216

KENDA CORPORATION, INC. d/b/a Pot O'Gold Pool League, Plaintiff, Appellee/Cross-Appellant David Rischitelli Plaintiff, Appellee, v. POT O'GOLD MONEY LEAGUES, INC., Jeffrey L. Germain, and David R. Kratze, Defendants, Appellants/Cross-Appellees Kenneth J. PERRY and D.F. Lete, Defendants.

No. 01-2493.

No. 01-2576.

No. 01-2577.

United States Court of Appeals, First Circuit.

Heard November 4, 2002.

Decided May 19, 2003.

COPYRIGHT MATERIAL OMITTED

Louis M. Ciavarra, with whom Bowditch & Dewey, LLP was on brief, for appellants Pot O'Gold Money Leagues Inc. and David R. Kratze.

Jeffrey L. Germain, pro se.

Patricia L. Davidson, with whom Robert L. Hamer and Mirick, O'Connell, DeMallie & Lougee, LLP were on brief, for appellee.

Before SELYA, Circuit Judge, COFFIN, Senior Circuit Judge, and LIPEZ, Circuit Judge.

LIPEZ, Circuit Judge.

In this complex suit between two corporations struggling for control over a national billiards league, Kenda Corporation, Inc., d/b/a Pot O'Gold Pool League ("Kenda"), had much more success before the jury and judge than Pot O'Gold Money Leagues, Inc., and the individual defendants Jeffrey L. Germain and David R. Kratze. Indeed, Kenda secured a damage award of $55,500 against the individual defendants for fraudulent inducement, and another award against them for $35,000 for tortious interference with contractual or advantageous business relationships. Pot O'Gold Money Leagues received nothing from the jury on its counterclaims. Moreover, Kenda persuaded the judge to rescind a number of its agreements with the defendants. Nevertheless, in this appeal and cross-appeal, all parties claim a variety of errors by the district court. With only one slight exception, we find no merit in any of these claims. The jury verdicts will stand. So too will the rulings by the court.

I. BACKGROUND

Kenda Corporation is a Massachusetts corporation that operates an amateur billiards league under the name Pot O'Gold Pool League. Kenneth Perry and David Rischitelli formed Kenda in July 1994. By the fall of 1997, the relationship between Perry and Rischitelli had become tense, but Kenda continued to operate its pool league. During that time period, Perry became acquainted with Jeffrey Germain, a businessman from Louisville, Kentucky, and they discussed the operation of the Pot O'Gold Pool League and its potential for expansion. In November 1997, Perry traveled to Detroit, Michigan, to meet with Germain and his partner David Kratze to discuss the creation of a national billiards league. Perry brought with him to this meeting Paul Frankel, who was, at the time, a regional director with Kenda's league. At the end of this meeting, the participants resolved to meet again in December.

On or about December 19, 1997, Perry and Frankel, along with four other individuals who were Kenda employees or league directors, returned to Detroit to meet with Germain and Kratze. On that day, the six attendees affiliated with Kenda, along with Germain, Kratze, and two of their associates, signed a series of documents which made them shareholders of Pot O'Gold Money Leagues ("Pot O'Gold"), a Kentucky corporation that Germain had established before the meeting. Each of the ten shareholders paid $200 to purchase ten shares of stock in the new corporation. Perry testified at trial that when he went into negotiations with Kratze and Germain, he thought they intended to invest in the league that Kenda had been operating since 1994. However, as became clear at this meeting, Kratze and Germain actually wanted to join with Perry and his associates to form a new corporation which would be operating a league competing with Kenda's.

Over the next few months, Perry, with the assistance of the Kenda employees and directors who had become shareholders in Pot O'Gold, transferred Kenda assets and control over regional leagues and tournaments to Pot O'Gold. These transfers occurred in a variety of ways. Perry directly transferred $26,000 from the Kenda corporate account to Pot O'Gold and Germain. He also directed Kenda employees to change the return addresses on the envelopes league members used to pay their dues. Instead of dues being mailed to Kenda's post office box, they now went to one controlled by Pot O'Gold. Kenda employees also copied and/or removed Kenda's bookkeeping records and statistics from Kenda's Massachusetts office to give to Germain and Pot O'Gold. On January 5, 1998, when Rischitelli arrived at the Kenda office, he discovered that the company's two employees had left, the corporate records were no longer in the office, and the league dues had not been sent to Kenda's post office box. He also discovered that $26,000 was missing from the Kenda bank account.

Later in January, Germain contacted Rischitelli in Massachusetts and asked him to meet with him and Kratze in Detroit. Rischitelli agreed, and the meeting occurred on January 23, 1998. At the start of this meeting, Kratze and Germain presented Rischitelli with a document entitled "Agreement Not to Compete and Protection of Confidential Information," which they told him he would have to sign before any business discussions ensued. Rischitelli executed the agreement that day in his individual capacity. Kratze signed as "CEO" of Pot O'Gold. The three parties then discussed Pot O'Gold's business plans and Rischitelli's potential role in the new corporation and league. After this meeting, Rischitelli agreed that he would become a consultant to Pot O'Gold. On February 5, 1998, he returned to Detroit and executed three contracts formalizing his (and Kenda's) relationship with Pot O'Gold.

The first contract, simply entitled "Agreement," states, inter alia, that Kenda, through Rischitelli, would provide consulting services to Pot O'Gold, relinquish all rights and control over the league, convey office equipment and handbooks to Pot O'Gold, and provide funds to operate the 1998 national tournament. In return, Kenda would be paid on a sliding scale tied to Pot O'Gold's gross revenues. Rischitelli also signed a "General Release of All Claims and Waiver of Rights" which purported to release Pot O'Gold and its "officers, directors and shareholders" from all possible claims Rischitelli or Kenda might bring. Finally, Rischitelli signed a separate agreement assigning the name "Pot O'Gold Pool League" to Pot O'Gold.

The new enterprise encountered immediate problems. By March 1998, Perry had become so frustrated with the manner in which Germain was operating the pool league that he contacted the league's regional directors, asking them to stop sending their weekly dues to Pot O'Gold and instead to send them to Kenda's post office box in Massachusetts. He told them that Rischitelli would take care of all the problems plaguing the league once he was in charge of operating it again. By the end of March, nearly all the teams that had formerly been associated with Pot O'Gold had reaffiliated themselves with Kenda, and Rischitelli started paying off Pot O'Gold's outstanding liabilities, including awards owed to teams that had won recent tournaments.

Shortly thereafter, Kenda sued Pot O'Gold, Kratze and Germain¹ ("the defendants") in Worcester Superior Court, alleging, inter alia, fraud, tortious interference with contractual and/or advantageous relationships, violations of Mass. Gen. Laws ch. 93A,² and violations of 18 U.S.C. § 1961 et seq. (civil RICO). Kenda also asked for a piercing of the corporate veil to allow personal recovery against Kratze and Germain if the jury found Pot O'Gold liable, and sought a declaratory judgment regarding the validity of the contracts it entered into with Pot O'Gold. In their answer, the defendants raised a number of counterclaims and third-party claims, including breach of contract, fraud, trademark (and servicemark) infringement, and violations of Chapter 93A against Kenda, and breach of contract, fraud and tortious interference against Rischitelli individually.

Prior to the commencement of trial, the district court informed the parties that it would issue a written decision on the declaratory judgment demands and the opposing Chapter 93A claims after the jury delivered its verdict. The remainder of the claims went to trial. The parties filed opposing motions for judgment as a matter of law at the close of evidence, and the district court dismissed Kenda's civil RICO claims and Pot O'Gold's claims against Rischitelli for fraud. After one day of deliberation, the jury returned the following verdict:

(1) Pot O'Gold was not liable for fraudulent inducement;

(2) Kratze and Germain were liable to Kenda for fraudulent inducement in the amount of $55,500;

(3) Kratze and Germain were liable to Kenda for $35,000 for tortious interference;

(4) Rischitelli was neither liable for tortious interference nor breach of contract.

While Kenda may not have run the table in its claims presented to the jury, it certainly came close. Shortly thereafter, the court issued its decision on the opposing Chapter 93A claims and the declaratory judgment, holding that all of the contracts Rischitelli signed on behalf of himself and Kenda on January 23 and February 5 were void and that neither party could prevail on its Chapter 93A claim. All parties now appeal.

II. THE APPEALS OF THE DEFENDANTS

In their brief on appeal, the defendants raise a panoply of objections to the outcome of this litigation. Arguing that the court erred in refusing to direct verdicts on certain claims, admitting certain evidence during the trial, and voiding the contracts at issue, the defendants ask us to undo the jury's verdict against them and overturn the court's declaratory judgment regarding the validity of the contracts. We decline the invitation.

A. Effects of the Jury's Verdict In Favor of Pot O'Gold

In its most complex argument on appeal, Pot O'Gold claims that the jury's verdict that it, the corporation, was not liable for fraudulent inducement "requires...