Nodak Oil Co. v. Mobil Oil Corp.

• Decision Date: 13 April 1976
• Docket Number: No. 75-1309,75-1309
• Citation: 533 F.2d 401
• Parties: NODAK OIL CO., a North Dakota Corporation, Appellant, v. MOBIL OIL CORP., a Foreign Corporation, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 401

533 F.2d 401

NODAK OIL CO., a North Dakota Corporation, Appellant, v. MOBIL OIL CORP., a Foreign Corporation, Appellee.

No. 75-1309.

United States Court of Appeals,

Eighth Circuit.

Submitted Jan. 19, 1976.

Decided April 13, 1976.

John Hjellum, Hjellum, Weiss, Nerison, Jukkala & Vinje, Jamestown, N. D., for appellant.

J. Gerald Nilles, Nilles, Hansen, Selbo, Magill & Davies, Fargo, N. D., for appellee.

Before MATTHES, Senior Circuit Judge, LAY and STEPHENSON, Circuit Judges.

STEPHENSON, Circuit Judge.

This diversity action was initiated by plaintiff-appellant Nodak Oil Co. (Nodak) in the United States District Court for the District of North Dakota. ¹ On Nodak's claim that defendant-appellee Mobil Oil Corp. (Mobil) fraudulently persuaded Champlin Oil Co. (Champlin) not to enter into a contract with Nodak, a jury returned a verdict on October 9, 1974, in favor of Nodak for actual damages in the sum of $733.42 and exemplary damages in the sum of $100,000. Mobil then made a motion for judgment notwithstanding the verdict in accordance with its motion for a directed verdict, or, in the alternative, for a new trial. On March 28, 1975, the trial court entered a judgment in which the verdict of the jury and the judgment entered pursuant thereto were set aside, but did not rule on the alternative motion for a new trial. Nodak Oil Co. v. Mobil Oil Corp., 391 F.Supp. 276 (D.N.D.1975).

An appeal was made to this court and on November 28, 1975, we remanded for the district court to make a conditional ruling on the alternative motion for a new trial as is required by Fed.R.Civ.P. 50(c)(1). Nodak Oil Co. v. Mobil Oil Corp., 526 F.2d 798 (8th Cir. 1975). On remand the district court certified that if its judgment notwithstanding the verdict was vacated or reversed, Mobil's alternative motion for a new trial would be granted on the grounds that the verdict was contrary to the clear weight of the evidence; the court erred in its instruction to the jury on the definition of fraud applicable to the facts of the case; and, the jury award for punitive damages was grossly excessive and appeared to have been rendered under influence of passion or prejudice. Nodak Oil Co. v. Mobil Oil Corp., Civil No. 4846 (D.N.D., December 11, 1975). The case is now under final submission to us for full consideration of the merits of Nodak's appeal from the trial court's orders. We reverse the trial court's order granting Mobil judgment notwithstanding the verdict and affirm the trial court's finding that a new trial is warranted on the basis that the punitive damages award is excessive and appears to have been rendered under the influence of passion or prejudice.

In our review of the trial court's order granting judgment notwithstanding the verdict we must consider the evidence in the light most favorable to the plaintiff as the party prevailing before the jury. Griggs v. Firestone Tire and Rubber Co., 513 F.2d 851, 857 (8th Cir. 1975); Hazelo v. Mesenbrink, 469 F.2d 252 (8th Cir. 1972).

In April 1972 Nodak executed an agreement with Jetstream, Incorporated, to purchase a car wash business owned and operated by Jetstream in Jamestown, North Dakota. On May 1, 1972, Nodak was to begin operation of the business which primarily consisted of the sale of gasoline. Jetstream had a dealer's contract with Mobil under which it had the right to purchase gasoline for retail sale, and in April, Nodak, through its president, Ray D. Mering, began negotiations with Mobil.

Mering went to Kansas City the week of April 3 and discussed with Marvin Houchin, the division general manager of Mobil, the possibility of a jobber's contract ² and the continuance of the Mobil retail operation at the Jetstream station for the month of May 1972. Mering testified that at the conclusion of this meeting Houchin told him he could operate under the old contract of Jetstream for the month of May.

After further negotiations in April, on May 1, 1972, Ed Heidzig, a Mobil representative, and Herschel Thompson, area manager for Mobil, informed Mering that Nodak could not continue under the contract which Nodak's predecessor, Jetstream, Inc., had with Mobil and that Mobil would not sell to Nodak without a contract. They presented Mering with a retail dealer's contract, a withdrawal letter ³ dated April 28, 1972, which was unsigned by Mobil, a proposed hauling allowance, ⁴ and a competitive allowance letter. ⁵ The instruments were executed by Nodak on May 1 and were handed to Thompson along with a letter signed by Mering which read:

I have signed the attached Retail Dealer contract, Withdrawal letter, and hauling allowance. I will keep Mobil Products in the Jetstream Car wash if all of the above contracts are approved. I will expect manifest and bill of lading instructions prior to May 10, so that I can immediately begin hauling product. I need product immediately and hope to have bill of ladings by Wednesday May 3, 1972.

Mering testified it was his understanding that a proposal was being submitted for one month only and in the meantime Mobil's Thompson and Heidzig would seek approval of a competitive allowance as proposed in the competitive allowance letter. On May 11, 1972, Heidzig advised Mering by telephone that he had been approved to buy the product but that the hauling allowance was not approved yet. Nobody had told Mering at that point that he was not going to get a hauling allowance. Mering then ordered delivery of the product for the next day and also received shipments on three other separate occasions in May. All the loads were hauled by common carrier.

At this point Nodak began negotiating a jobber's contract with Champlin. After a May 17, 1972, meeting between Mering and Champlin's George Morris and John Olive a jobber's contract was executed by Nodak. This one-year contract was to take effect on June 1, 1972, and Nodak offered substantial proof that it had a reasonable expectancy of consummating the foregoing contractual relationship with Champlin if it had not been for the intervening actions of Mobil. ⁶

On May 25, 1972, Nodak wrote to Mobil's Houchin in Kansas City that he was planning to terminate the Mobil-Jetstream relationship because he was disappointed that he was not making any progress with Mobil.

On May 26, 1972, Mobil's Heidzig and Thompson returned to Mering's office and informed Mering for the first time that Nodak had been denied the right to haul Mobil products. They also presented him with the retail dealer's contract which had been signed by Mobil by this time and a competitive allowance letter which contained different terms than the earlier letter. Mering refused to sign the cover letter which acknowledged that the hauling allowance had been denied.

On May 29, 1972, Mobil's Thompson was notified that the Mobil signs had been removed from the Jetstream station and Champlin signs had been put up. He called John Olive, regional manager for Champlin, and said in Thompson's words:

Well, I related to him that the Mobil sign had been taken down at the Jetstream Car Wash and the Champlin sign had been put up, and was he aware we had a contract with Mr. Mering?

Olive responded by saying that the Champlin signs would be removed because they were not in the habit of jumping other oil company contracts. Champlin then ceased negotiations with Nodak and refused to discuss the jobber's contract until the Mobil matter was cleared up.

Mering wrote Mobil a second letter on May 31, "cancelling the Retail Dealer Contract between Mobil and Jetstream Car Wash." In response to this letter, J. William Dalgetty, Mobil's attorney, wrote Mering under date of June 6, 1972, asserting that there was no provision in the contract to terminate it prior to April 30, 1973, and threatening Mering with legal damages if he persisted. On the same date, June 6, 1972, Nodak's attorney wrote Mobil's Houchin giving a brief summary of what had happened and advising him that due to a lack of mutuality between Nodak and Mobil the contract presented had not been acceptable and would not be consummated. He also demanded that Mobil give notice to correct any misinformation which had previously been given by Mobil to others. Upon receipt of the June 6 letter from Mobil's Dalgetty, the attorney for Nodak sent a second letter, addressed to Dalgetty and dated June 9, 1972. This letter also stated that there was no contract between Mobil and Nodak, because there had not been mutual agreement on the terms, and asked for immediate confirmation that notice of this fact had been given to Champlin.

Yet another letter was mailed by Nodak's attorney to Mobil's Dalgetty on July 13, 1972, and it included the statement that Champlin still had not been notified that no contract existed and again requested that such notification be immediately sent to Mr. Olive of Champlin. This letter finally elicited a response from Mobil. On July 19, 1972, N. A. Deighton, Mobil's district manager, called Champlin's Olive and, according to Olive's testimony, informed him that Champlin could have Nodak's account. Olive did not recall that Deighton said Mobil was not claiming to have a contract with Nodak. ⁷ Olive acknowledged the call in a letter to Deighton on July 24, 1972, and asked for an "appropriate instrument of termination of all agreements between Mobil and Nodak." Mobil did not respond to this request and Deighton's answer to the question as to why he did not, was: "I didn't feel it was necessary that I comply with the letter." Nodak was not apprised of the telephone call from Deighton to Olive, nor of Olive's letter to Mobil. Nodak thereafter was unable to effect a jobber's contract with Champlin, and brought suit against Mobil for "unlawfully, oppressively, fraudulently and maliciously" persuading Champlin not to enter into a contract with Nodak.

The first point raised on appeal by Nodak is that the district court incorrectly required Nodak to prove fraud, or coercion in its claim for...