Porterco, Inc. v. Igloo Products Corp.

• Decision Date: 03 February 1992
• Docket Number: No. 90-1992,90-1992
• Citation: 955 F.2d 1164
• Parties: PORTERCO, INC., Appellee, v. IGLOO PRODUCTS CORP., Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1164

955 F.2d 1164

PORTERCO, INC., Appellee, v. IGLOO PRODUCTS CORP., Appellant.

No. 90-1992.

United States Court of Appeals,

Eighth Circuit.

Submitted Jan. 8, 1991.

Decided Feb. 3, 1992.

J. Ray Riley of Houston, Tex., argued (Bobby E. Shepherd, El Dorado, Ark., on the brief), for appellant.

Robert C. Compton and Carol Crafton Anthony, El Dorado, Ark., on the brief, for appellee.

Before JOHN R. GIBSON, BOWMAN, Circuit Judges, and SACHS, ^* District Judge.

BOWMAN, Circuit Judge.

Porterco Incorporated ("Porterco"), the plaintiff in this diversity case, is an Arkansas corporation whose principal place of business is in Magnolia, Arkansas. The defendant, Igloo Products Corporation ("Igloo"), is a Delaware corporation whose principal place of business is in Houston, Texas. In July 1989, Porterco commenced this action in an Arkansas state court alleging it had been damaged by Igloo's breach of a contract for the sale of goods. Igloo, which had begun its own lawsuit over the matter in a Texas state court, removed Porterco's complaint to the District Court ¹ pursuant to 28 U.S.C. § 1441(a) (1988). After removal, Igloo filed a counterclaim alleging that Porterco's own breach of the sales contract entitled Igloo to damages, and the case proceeded to trial. The District Court directed a verdict against Igloo's counterclaim, and the jury awarded Porterco $30,000.

Igloo appeals, contending that the District Court erred by (1) refusing to grant a directed verdict against Porterco's claim, and (2) directing a verdict against Igloo's counterclaim. We affirm.

I

Igloo and Porterco manufacture consumer items; along with other products, Porterco makes "soft" coolers from vinyl and fabric and Igloo makes "hard" coolers from molded plastic. The two companies began doing business in 1986-87. From time to time Igloo purchased soft coolers from Porterco and other vendors for resale under the Igloo trademark. By the time this dispute arose, the parties had completed over thirty transactions and had developed a friendly commercial relationship.

In 1988, Igloo began to negotiate with Tupperware Home Parties ("Tupperware") for a contract to manufacture hard coolers. If Igloo secured this business Tupperware would become Igloo's third-largest account. Tupperware wanted to sell the hard coolers together with soft coolers and apparently expected Igloo to provide both items. According to Lee Eckford, an Igloo employee responsible for purchasing materials Igloo would need to fulfill its Tupperware contract, by June 1988 Igloo "had some prototype samples that were done in a rush to get a conceptual idea approved through Tupperware ... [and] some loose" specifications for the soft cooler. Transcript of Trial ("Tr.") at 322.

Eckford sent Porterco a drawing of the proposed soft cooler, which included:

the general parameters that Tupperware wanted the soft-sided coolers to meet, mainly the type of fabric and what it was supposed to look like. But nothing determining exactly what it was to look like. That was to be developed over the next several months.

Tr. at 323. Eckford asked Porterco to estimate its price for manufacturing as many as 250,000 soft coolers. Porterco was unable to meet Igloo's suggested price with its standard products. After evaluating the drawing and the degree of assistance it could obtain from other manufacturers, Porterco president Calvin Porter wrote Igloo president Jon Godshall to explain that Porterco was unable to make the soft cooler.

Nevertheless, at the beginning of September 1988, Eckford sent Porterco a prototype of the soft cooler and a list of alterations that Igloo desired the finished product to embody. Eckford asked Porterco to estimate its price for manufacturing at least 300,000 soft coolers as soon as possible. Igloo was also making inquiries at other firms including PGA, a Houston-based company that obtained soft coolers from the Republic of China (Taiwan). Porterco was the only domestic supplier that Igloo contacted regarding the Tupperware project.

After again discussing the project with potential subcontractors, Porterco estimated a price between $5.75 and $5.85 for each soft cooler. When Eckford responded that this price was too high, Porter suggested the use of lesser-quality materials. Porter and Eckford also discussed shipping the coolers in large boxes, thereby lowering Porterco's freight charges.

With these suggestions in hand, Porterco spoke to its own suppliers to see if they could provide the soft cooler's components. When Porterco told Igloo that the changes and new shipping method lowered its price to $4.95 per soft cooler, Eckford told Porter he would propose that Igloo purchase 150,000 soft coolers from Porterco and another 150,000 soft coolers from PGA. Eckford also discussed the possibility of another large amount of the same coolers being ordered from Porterco or another firm in the future. Eckford told Porter that he would put the matter before Godshall.

When these ideas were discussed at Igloo, the company decided to split its requirement for 300,000 soft coolers between Porterco and PGA, which had previously told Igloo that it would only charge $4.00 per soft cooler. Although this price was substantially lower than Porterco's, Godshall agreed with Eckford that at least half of the soft coolers should be ordered from Porterco. Godshall later said this decision resulted from his preference to purchase American goods whenever possible and the fact that Igloo never had ordered products from the Republic of China and therefore was concerned about PGA's reliability. Moreover, Eckford realized that because Porterco was closer to Igloo's Texas facility, Igloo could schedule Porterco's deliveries to begin first, thereby allowing time for overseas shipment from the Republic of China.

On September 8, 1988, Eckford called Porterco on the telephone and gave it purchase order number 03917. According to a practice that Porter testified was common in the industry, Igloo always gave Porterco purchase order numbers by telephone; when Porterco received the number it would immediately begin to fill the order. Any samples or prototypes always were developed or agreed upon beforehand. Indeed, on many past transactions Porterco did not receive an actual purchase order form from Igloo until after it had shipped the goods. Consequently, the day after Porterco received the purchase order number it began to order what Porter later described as "[a] tremendous amount," Tr. at 93, of the materials needed to make the soft cooler according to the prototype and changes he had discussed with Eckford. Porterco also ordered new machines that it needed to make the soft coolers.

Although Tupperware had ordered 300,000 cooler combinations from Igloo in September, ² the two companies had not settled on a design for the soft cooler. Eckford later testified that on September 8, 1988, he specifically told Porter that changes would be made to the soft cooler's design, and testified that he issued the purchase order number at Porter's request and only to allow Porterco to order the fabric the parties had agreed to use. Porter, however, testified Eckford never indicated that the transmission of the purchase order number was not an order for the cooler the parties had already discussed, and testified that Eckford specifically "instructed" him "to get all the raw materials in, to begin immediately so [Porterco] could start producing" the soft coolers. Tr. at 198.

In October 1988, Porter traveled to Houston, where a trade show was taking place at which he could buy equipment Porterco needed to produce the soft cooler he thought Igloo wanted his company to make. Porter recalled that Porterco "had a lot of the raw materials in the warehouse at that time, and everything had been ordered." Tr. at 98. Porter called on Eckford, along with another Igloo employee responsible for marketing and the company's national sales manager, with regard to other matters of business between the two companies. None of these persons indicated that Porterco would be required to produce a sample soft cooler for Igloo's approval.

Shortly after these visits, however, Igloo told Porterco to produce a sample for Igloo's evaluation. Igloo sent Porterco a second prototype that had numerous changes from the one that had been sent to the company in September. Particularly, the second prototype's fabric was different from that which Porterco had already ordered. ³ Porterco, which allegedly had spent $400,000 ordering material to produce the soft cooler it discussed with Igloo in September, developed the sample using some materials that were unavailable in the United States and had to be provided by Eckford. Due to these changes Porterco asked for--and eventually received--a price ten cents higher than the $4.95 it had originally quoted to Igloo.

Eventually, Porterco was able to produce a sample that met with Igloo's approval. Igloo and Tupperware agreed on a design for the soft cooler in November 1988, and on November 22, 1988, Porterco received by fax Igloo's purchase order (on a pre-printed form, with blanks for price, quantity, and other deal-specific terms filled in) for 150,000 soft coolers. That same day Igloo sent a purchase order to PGA for 150,000 soft coolers at a price of $3.89 per cooler. Except as to the terms concerning price, quantity, and time of delivery, the faxed purchase order received by Porterco was identical to the purchase-order terms of thirty-five previous sales contracts between the parties. Igloo was to receive the first shipment of 16,000 soft coolers on December 21, 1988 and receive 16,000 a week until the last delivery of 6,000 on February 22, 1989.

On November 29 and 30 Porterco, citing production delays caused by Igloo's design changes, faxed proposed new delivery schedules to Igloo. Each schedule proposed that Porterco's first delivery would occur on or before December 21, 1988, and would consist of...