Roboserve, Inc. v. Kato Kagaku Co., Ltd.

• Decision Date: 17 January 1995
• Docket Number: No. 92 C 5248.,92 C 5248.
• Citation: 873 F. Supp. 1124
• Parties: ROBOSERVE, INC., Plaintiff, v. KATO KAGAKU CO., LTD., et al., Defendant.
• Court: U.S. District Court — Northern District of Illinois

873 F. Supp. 1124

ROBOSERVE, INC., Plaintiff, v. KATO KAGAKU CO., LTD., et al., Defendant.

No. 92 C 5248.

United States District Court, N.D. Illinois, Eastern Division.

January 17, 1995.

COPYRIGHT MATERIAL OMITTED

Robert B. Breisblatt, Eric Charles Cohen, Avrum Sidney Katz, Jerold B. Schnayer, Suzanne Hines, Welsh & Katz, Ltd., Chicago, IL, for plaintiff.

Jerome H. Torshen, Abigail K. Spreyer, Torshen, Schoenfield & Spreyer, Ltd., Michael P. Connelly, Kathleen Anne Bridgman, Eugene Stuart Kraus, Charles Patrick Piacentini, Jr., Connelly & Schroeder, Chicago, IL, for Kato Kagaku Co., Ltd.

Jerome H. Torshen, Michael P. Connelly, Kathleen Anne Bridgman, Eugene Stuart Kraus, Chicago, IL, for Kato Real Estate Corp.

MEMORANDUM OPINION

BRIAN BARNETT DUFF, District Judge.

On August 4, 1992, Plaintiff Roboserve, Inc. ("Roboserve"), sued Defendant Kato Kagaku Co., Ltd. ("Kato"), claiming breach of contract, wrongful termination, and fraud. The parties went to trial on October 18, 1993, and the jury returned a verdict in Roboserve's favor on all counts, awarding it compensatory and punitive damages totalling $9,950,000. Subsequently, Kato filed a motion for judgment as a matter of law, or, in the alternative, for a new trial or a remittitur. We grant in part the motions for judgment as a matter of law and remittitur, and we deny the motion for new trial.

I. Background

Roboserve is a company that leases and services hotel minibars, and Kato owns the Hyatt Regency Chicago ("HRC"), a hotel in Chicago. On June 23, 1986, Roboserve and Hyatt Corporation ("Hyatt"), the HRC's manager, signed a Concession Agreement ("CA"). The CA provided, among other things, that Roboserve would install 1000 of its minibars, called RoboBars, in the HRC rooms and that the HRC would use reasonable endeavors to place guests who are the most likely to use minibars in the RoboBar rooms and, further, to encourage those guests to make purchases from the minibars.¹ On October 2, 1986, Roboserve and Hyatt negotiated an Amended CA. The amended version altered the CA's duration, making it last five years from "the date when all the RoboBar units have been commissioned," meaning installed. A Roboserve representative signed the amended CA, but a Hyatt representative did not.

Four issues arose during the implementation phase of the CA. First, between February and April 1987, Roboserve installed in the HRC's west tower only 900 of the called-for 1000 units. Second, Hyatt contracted with ServiSystems, a Roboserve competitor, to install in the east tower a number of ServiBars, the ServiSystems minibars. Third, as a result of having the second minibar system in the hotel, the HRC may not have used reasonable endeavors to ensure that it placed the "correct" people in the RoboBar rooms. Fourth, the HRC also may not have used reasonable endeavors to encourage guests to make purchases from the RoboBars.

Of the four issues, the one surrounding Hyatt's relationship with ServiSystems was the most complex. In late 1987, Roboserve learned of Hyatt's intention to contract with ServiSystems, and on April 22, 1988, Roboserve received a letter from Hyatt confirming its intention to "proceed with the ServiBar installation into the west tower."² Pl. Ex. 2. Unbeknownst to Roboserve, on May 1, 1988, Hyatt signed a contract with Servisystems to provide ServiBars for the HRC "for a term commencing on May 15, 1988 and expiring on May 14, 1995." Pl.Ex. 12. On November 11, 1988, however, after Kato acquired the HRC and confirmed Hyatt as the hotel's manager,³ Mr. Zadikoff, one of Hyatt's vice presidents, wrote to Roboserve the following:

As we discussed, our objective at the Hyatt Regency Chicago was to evaluate the two Honor Bar systems that are presently being utilized in our hotels — RoboBar and ServiBar. The agreement was that ServiBar would be installed in one tower of the Hyatt Regency Chicago for a one-year test period only, so that we could evaluate both sales potential and operational costs.

Pl.Ex. 3. According to Roboserve, Hyatt also communicated to it orally that the winner of the test would become the preferred minibar provider for Hyatt hotels and would "get the Hyatt business."

After Roboserve won the one-year test, Hyatt negotiated with Roboserve about replacing the ServiBars with RoboBars, despite Hyatt's contract to maintain the ServiBars at the hotel through 1995. Much later, on February 26, 1992, Hyatt announced that it had "complications of another contractual arrangement" and would be unable to replace the ServiBars with RoboBars. Pl.Ex. 32. On December 14, 1992, Mr. Keeshin, Hyatt's Associate General Counsel, informed Roboserve that, as of March 1, 1993, Hyatt would terminate the amended CA. Pl.Ex. 196.

II. Discussion

A. Standard of Review

Kato moves for a judgment as a matter of law, or, in the alternative, for a new trial.⁴ Kato's motion "is a remedy for a party who lost the verdict. He ... contends that he is entitled to judgment as a matter of law. By the alternative motion, he asks the court to grant him a new trial if he is wrong in his contention that he is entitled to judgment." 9 Charles A. Wright and Arthur R. Miller, Federal Practice and Procedure, § 2539 (1971).

"As to the motion for judgment as a matter of law, ... we apply the Illinois rule that such a motion should be granted only if `all of the evidence, when viewed in its aspect most favorable to the opponent of the motion so overwhelmingly favors the movant that no contrary verdict based on that evidence could ever stand.'" Hardin, Rodriguez & Boivin Anesthesiologists, Ltd. v. Paradigm Ins. Co., 962 F.2d 628, 640 (7th Cir.1992) (quoting Schultz v. Amer. Airlines, Inc., 901 F.2d 621, 623 (7th Cir.1990) (quoting an Illinois Supreme Court case)).

"On motions for a new trial the federal standard applies, even in diversity cases. citation omitted. Under the standard, `a new trial can be granted only when the jury's verdict is against the clear weight of the evidence.'" Id. (quoting Davlan v. Otis Elevator Co., 816 F.2d 287, 289 (7th Cir.1987)).

B. Breach of Contract Claim

1. Kato's Denial of Breach

First, Kato denies that it breached the CA by allowing the installation of only 900 of the called-for 1000 RoboBars. It claims that Roboserve installed only 900 units because Roboserve never asserted its right to install the additional 100. Kato argues that it should not now be forced to pay damages for Roboserve's failure to maximize the CA.

Roboserve maintains that Kato breached the CA. For support, it points to the testimony of Mr. Fattal, a Roboserve executive. At trial, Mr. Fattal referred to his February 20, 1987, letter to Mr. Connolly, Hyatt's Senior Vice President and General Counsel, in which he wrote: "As regards installations, the position is as follows: — ... (iv) the HRC: Being installed starting 9 February, with approximately 900 bars. Should be completed during March." Pl.Ex. 41; Tr. at 93. Mr. Fattal testified that, through this letter, he informed Hyatt of the intentions of Roboserve to install the additional 100 units. Tr. at 93. Mr. Fattal claimed that Hyatt understood Roboserve's intentions and wanted to frustrate them. As evidence, he pointed to an internal memo that Mr. Connolly wrote and attached to the February 20 letter. The memo states: "Before proceeding with any further installations, I believe we should review the success (or lack thereof) of the Robobar program to date." Pl Ex. 41.

Mr. Fattal also testified that Mr. Wood, another Roboserve employee, informed Hyatt of the intentions of Roboserve with regard to the 100 units. When Roboserve's counsel asked Mr. Fattal if he "knew if Mr. Wood ever discussed the hundred bars with Mr. Connolly", Mr. Fattal responded: "I believe so, yes, sir." Tr. at 97.

Roboserve's evidence of its intentions about the 100 minibars is unclear. Does Mr. Fattal's February 20 letter imply that Roboserve would "start" the installation process with the 900 units and "complete" it with the remaining 100? Does the letter imply that Roboserve would start the installation process with the 900 units in "February" and complete it with the remaining 100 in "March"? Does Mr. Fattal's testimony about Mr. Wood imply that Mr. Wood told Mr. Connolly about Roboserve's intention to install the additional minibars?

Although Roboserve's evidence is unclear, for the purposes of Kato's motion we view the evidence "in its aspect most favorable to the opponent." Hardin, 962 F.2d at 640. Viewed in that aspect, we cannot say that the evidence "so overwhelmingly favors the movant that no contrary verdict based on it could ever stand." Id. Therefore, on this point, Kato is entitled to neither a judgment as a matter of law nor a new trial.

Second, Kato denies that it breached the CA by failing to use reasonable endeavors to place the "correct" people in the RoboBar rooms or to encourage those people to make purchases from the minibars. It claims that Roboserve produced insufficient evidence to prove that Kato breached and that, in any event, such evidence would be difficult to produce given that Hyatt could not know which hotel guest would want to use a minibar on any given night.

Roboserve maintains that it produced sufficient evidence. For example, it points to the evidence that, although Hyatt knew guests who stayed in its Gold Passport rooms would, on average, purchase more items from minibars, it allowed only ServiBars in those rooms. Tr. at 125, 569. Also, Roboserve points to the evidence that Hyatt's standard procedure for welcoming guests excluded informing them that their room contained a RoboBar. Tr. at 603-4.

Here, Roboserve's evidence is unambiguous. Kato could have allowed RoboBars in the Gold Passport rooms, but it did not. Cf. CA § 8(1)(n). It could have informed guests of their RoboBars, but it did not. Cf. CA § 9(3). In other words, Kato knew of concrete, objective ways to promote RoboBars, but it opted against promoting...