Lightning Lube, Inc. v. Witco Corp.
| Citation | 4 F.3d 1153 |
| Decision Date | 10 September 1993 |
| Docket Number | Nos. 92-5476,92-5543,s. 92-5476 |
| Parties | , RICO Bus.Disp.Guide 8379, 38 Fed. R. Evid. Serv. 902 LIGHTNING LUBE, INC.; Laser Lube, a New Jersey Corporation v. WITCO CORPORATION; Avis Service, Inc.; Avis Lube, Inc.; Avis Enterprises, Inc., Defendants/Third Party Plaintiffs, v. Ralph VENUTO, individually and d/b/a Laser Lube, Lightning Lube, and Automotive Management Systems; Carol Venuto, his wife, individually; Automotive Management Systems, Inc., a New Jersey Corporation, Third Party Defendants, Witco Corporation, Appellant. LIGHTNING LUBE, INC.; Laser Lube, a New Jersey Corporation v. WITCO CORPORATION; Avis Service, Inc.; Avis Lube, Inc.; Avis Enterprises, Inc., Defendants/Third Party Plaintiffs, v. Ralph VENUTO, individually and d/b/a Laser Lube, Lightning Lube, and Automotive Management Systems; Carol Venuto, his wife, individually; Automotive Management Systems, Inc., a New Jersey Corporation, Third Party Defendants, Lightning Lube, Inc., t/a Laser Lube, Appellant. |
| Court | United States Courts of Appeals. United States Court of Appeals (3rd Circuit) |
Ronald S. Rolfe (argued), Lewis J. Liman, Cravath, Swaine & Moore, New York City, Brendan T. Byrne, John G. Gilfillan, III, Carella, Byrne, Bain, Gilfillan, Cecchi & Stewart, Roseland, NJ, for appellant-cross-appellee Witco Corp.
Laurence H. Tribe (argued), Jonathan S. Massey (argued), Cambridge, MA, Steven M. Kramer, Jeffrey S. Nowak, New York City, for appellee-cross-appellant Lightning Lube, Inc.
These appeals arise from a civil action brought in the United States District Court for the District of New Jersey, in which a quick-lube franchisor, Lightning Lube, Inc. t/a Laser Lube (Lightning Lube), obtained a jury verdict for approximately $11.5 million in compensatory damages and $50 million in punitive damages against its motor oil supplier, Witco Corporation (Witco). Lightning Lube accused Witco of breaching its supply agreement and destroying Lightning Lube's relationship with its franchisees to benefit a competing quick-lube business that Witco had started with Avis Services, Inc. (Avis). Witco's actions allegedly caused Lightning Lube's existing franchisees either to abandon it or to hold back payment of royalty fees and resulted in large numbers of prospective franchisees never opening Lightning Lube centers. As a result, Lightning Lube lacked the cash flow necessary to continue operating and its owner, Ralph Venuto, was forced to sell its assets to another company for far less than their true worth.
Lightning Lube asserted six claims against Witco, but at the end of the trial, only four remained in the case: (1) breach of contract; (2) fraud and misrepresentation; (3) intentional interference with contracts and prospective contractual advantage; and (4) punitive damages. At the conclusion of a three-month trial, the jury returned a verdict of liability on all four counts, though not on every claim within each count. The jury, however, found in favor of Witco on counterclaims to recover payment for unpaid charges for equipment and oil. Thereafter Witco moved for judgment as a matter of law or, in the alternative, for a new trial. The district court granted the motion in part and denied it in part in a comprehensive opinion dated September 2, 1992. See Lightning Lube, Inc. v. Witco Corp., 802 F.Supp. 1180 (D.N.J.1992). In its opinion, the district court granted judgment and, alternatively, a new trial, on two of the fraud claims on which separate verdicts for $1.0 million each had been returned and on the punitive damages claims, but denied Witco judgment or a new trial on Lightning Lube's third fraud claim, on which no damages had been awarded, and on Lightning Lube's claims of tortious interference with economic relations and breach of contract. The court, therefore, left intact approximately $9.5 million of the approximately $61.5 million that the jury originally had awarded to Lightning Lube.
Witco now appeals from the district court's order of September 2, 1992, to the extent it denied Witco's motion as to the tortious interference and breach of contract claims. Lightning Lube cross-appeals from the district court's grant of judgment and a conditional new trial to Witco on Lightning Lube's fraud and punitive damages claims. It also appeals from the district court's pretrial order of February 19, 1991, granting summary judgment to Witco on Lightning Lube's RICO claims. 1 For the reasons discussed below we will affirm the district court's orders in their entirety.
We have jurisdiction pursuant to 28 U.S.C. Sec. 1291. The district court had subject matter jurisdiction pursuant to 28 U.S.C. Secs. 1331 (the RICO claims) and 1332 (all other claims). The parties are in agreement that New Jersey law governs the state law claims.
To the extent that the facts at trial were in dispute we state them in the light most favorable to the verdict winner, i.e, Lightning Lube on the complaint and Witco on its counterclaim for nonpayment for equipment and oil. From late 1985 until 1989, Lightning Lube was a quick-lube franchisor. Consumers go to a quick-lube center to have oil changes and related services performed on their vehicles in approximately ten minutes. As part of its franchise agreements, Lightning Lube agreed to provide oil, equipment, site-selection assistance, training, and marketing assistance to its franchisees in exchange for royalty and advertising fees. Lightning Lube grew out of the business of third-party defendant Automotive Management Systems, Inc., a franchisor of transmission and brake and muffler facilities run by the third-party defendant Ralph Venuto. Venuto and another person founded Lightning Lube in 1985, but in June 1986, Venuto bought out his partner's interest, and became the sole owner of the company.
From June 1986 to August 1987, Witco, 2 through a division called Kendall Refining Company, 3 sold motor oil to Lightning Lube and provided Lightning Lube franchisees with oil dispensing equipment. The Kendall division refines petroleum from its own wells and from other sources for use as automotive motor oil. Witco instituted a program for quick-lube national accounts and independent quick-lube operators, whose participants could purchase Kendall oil at a discount. Under this program, Witco would supply a quick-lube operator with lubrication dispensing equipment on loan, free of charge, on the condition that the operator sold Kendall oil through the equipment in a specified minimum quantity. Witco could repossess the equipment if the operator did not adhere to the minimum-use requirement.
In April and May 1986, Ralph Venuto met with representatives of Witco to discuss the possibility of Lightning Lube becoming a Witco quick-lube national account. At these meetings Venuto inquired whether Witco, in a departure from the industry norm, would consider loaning Lightning Lube money to purchase the lube equipment instead of loaning Lightning Lube the equipment itself. Venuto desired to buy his own equipment because he did not want...
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