Source Direct, Inc. v. Mantell

• Decision Date: 18 March 1994
• Docket Number: No. 69015,69015
• Parties: SOURCE DIRECT, INC., Appellee, v. Donald J. MANTELL, M.D., Appellant.
• Court: Kansas Court of Appeals

Page 686

870 P.2d 686

19 Kan.App.2d 399

SOURCE DIRECT, INC., Appellee, v. Donald J. MANTELL, M.D., Appellant.

No. 69015.

Court of Appeals of Kansas.

March 18, 1994.

Syllabus by the Court

1. In order to establish in personam jurisdiction over a nonresident defendant, a plaintiff must prove that the provisions of K.S.A. 1993 Supp. 60-308(b), the Kansas long arm statute, are satisfied and that the exercise of in personam jurisdiction affords the defendant due process of law under the Fourteenth Amendment.

2. There are three basic factors which must coincide if jurisdiction is to be entertained over a nonresident on the basis of transaction of business within the state. These are: (1) The nonresident must purposefully do some act or consummate some transaction in the forum state; (2) the claim for relief must arise from or be connected with such act or transaction; and (3) the assumption of jurisdiction by the forum state must not offend traditional notions of fair play and substantial justice, consideration being given to the quality, nature, and extent of the activity in the forum state, the relative convenience of the parties, the benefits and protection of the laws of the forum state afforded the respective parties, and the basic equities of the situation.

3. If, after a corporation comes into existence, it expressly or impliedly ratifies a contract made for its benefit by its organizers before it was formed, such contract becomes the contract of the corporation and the corporation is entitled to the benefits thereof and is liable thereon.

4. In order to avoid liability due to the failure of a condition precedent to performance of a contract, a party must affirmatively show that the condition precedent actually failed and, because of such failure, the contract will not be performed. Whether a contracting party's refusal to perform was because of a genuine claim that a condition precedent failed is a question for the finder of fact and that finding must be supported by substantial competent evidence.

5. Expectation damages for breach of contract usually consist of lost profits plus any incidental or consequential losses caused by the breach.

6. In Kansas, loss of profits resulting from a breach of contract may be recovered when such profits are proved with reasonable certainty and when they may reasonably be considered to have been within the contemplation of the parties.

7. Reliance damages for a breach of contract include expenditures made and property consumed in reliance on the contract and are usually sought as an alternative to expectation damages when lost profits cannot be proven with reasonable certainty.

8. Reliance damages must be the proximate result of the breach of contract, and damages which are remote, contingent, and speculative in character cannot serve to support a judgment.

9. The damages recoverable by an employer when an employee breaches his or her employment contract are usually measured by the cost of obtaining other services equivalent to those promised and not performed, plus any additional foreseeable consequential damages.

10. In an action to recover damages, in order for the evidence to be sufficient to warrant recovery of damages, there must be some reasonable basis for computation which will enable the finder of fact to arrive at an approximate estimate thereof.

11. One who claims damages on account of a breach of contract must not only show the injury sustained, but must also show with reasonable certainty the amount of damage suffered as a result of the injury or breach. A finder of fact should not be allowed to merely speculate in arriving at damages.

Douglas M. Greenwald and Daniel F. Church, of McAnany, Van Cleave & Phillips, P.A., Kansas City, for appellant.

Joe L. Norton and Steven B. Moore, of Watson, Ess, Marshall & Enggas, Olathe, for appellee.

Before GREEN, P.J., and BRAZIL and LEWIS, JJ.

GREEN, Presiding Judge:

This case involves a breach of contract action wherein the defendant, Dr. Donald Mantell, appeals the judgment of the trial court awarding the plaintiff, Source Direct, Inc., damages in the amount of $41,823.25.

Source Direct, Inc., (Source Direct) incorporated in Kansas for the purpose of distributing a product called LazyTrim diet system. The shareholders of Source Direct, Edward "Joe" Martin, Rick Jensen, and Richard Waggoner, own at least six different business entities, all of which are involved in the direct marketing of "miracle" diet products.

Typically, Martin obtains a source of vitamin pills, develops literature to support a diet plan using the pills, contracts with a physician to endorse the diet, advances the physician a small amount of money to create a file of patients who have benefited from the diet, forms a new corporation to market the diet, and buys advertising on television or in tabloid newspapers. After about two years, sales usually "go flat," and Martin renames the diet plan, creates a different corporation to sell it, and hires a new physician to act as the endorser.

Dr. Donald Mantell, who earned his M.D. degree in Belgium, operates a family health clinic in Evans City, Pennsylvania, specializing in preventative medicine and nutrition. Mantell claims to be a doctor of homeopathic medicine as well as a member of over 30 professional societies. During Mantell's testimony at trial, however, he admitted that he received his degree in homeopathic medicine from the now defunct "International University in Los Altos, California" following a brief correspondence course and that few, if any, of the professional societies in which he claims membership actually exist.

Mantell became interested in obtaining product endorsement contracts in 1989, and in pursuit of such opportunities, Mantell entered into a medical talent agency agreement with Morton Walker, D.P.M., of Stamford Connecticut, who is the sole proprietor of Freelance Communications Talent Agency. In his business, Walker serves as a medical talent agent for doctors who are seeking endorsement opportunities. He also writes advertising copy for proposed products and ghostwrites books and articles for holistic physicians.

Walker met Mantell in 1988 and proposed that Mantell become involved in a venture translating a French book on herbal medicine into English. Although that project fell through, Walker entered into an agency agreement with Mantell in which Walker was to "negotiate suitable agreements" and "create new projects" for Mantell.

Walker brought a total of six projects for diet products to Mantell under the agency agreement. In one such project, Cal-Block 3000, Mantell permitted his name and forged signature to appear on numerous product advertisements. The ads contained a number of false representations of which Mantell was aware but to which he did not object. In another project, Mantell's endorsement of Finnslim appeared on his office stationery and falsely stated that he had reviewed the diet program. In fact, the endorsement letter was written solely by Walker without any input from Mantell. Again, Mantell did not object and collected his compensation check.

Mantell first became involved with Martin in a project for Metabozene/3X. Ads for the product contained false representations and listed a fictitious office for Mantell in Kansas City, Kansas. Mantell also contracted with Martin to endorse LiquidTrim, and a letter supposedly written by Mantell was distributed that highly praised the product and listed a business address in Kansas City, Kansas. Mantell had no direct contact with Martin in either of these projects, which were negotiated by Walker on Mantell's behalf.

In December 1990, Walker entered into negotiations with Martin for Mantell to endorse LazyTrim. Initially, the LazyTrim project involved another physician, Dr. Kirk, but when sales declined, Martin decided to bring in a new doctor and change the advertising copy. Mantell was to provide his name, photo, and reputation in order to collect his endorsement fee. Walker testified it was his understanding that Martin would be organizing a company later to handle the distribution of LazyTrim if Mantell's endorsement could be obtained. Walker discussed the LazyTrim project with Mantell and then sent Martin a letter on December 14 saying that "it's a deal."

In January 1991, Mantell received a copy of the proposed LazyTrim advertisement, made two minor changes in the text concerning his medical credentials, and sent the ad back to Walker; however, Mantell requested to see the final proofs before publication. Walker forwarded the ad to Martin, writing that it had been approved as modified by Mantell and said nothing about Mantell wanting to see the final copy. The proposed advertisement that was sent to Mantell referred to Source Direct as Mantell's midwest distributor located in Kansas City, Kansas.

In February and March 1991, the LazyTrim ad with Mantell's endorsement was test run in several markets around the country. On March 7, Source Direct was formally created to handle the distribution of LazyTrim. On March 22, Source Direct issued a $5,000 advance to Walker against the royalties to be paid under the contract.

In early April 1991, the LazyTrim ad ran in the Los Angeles Times, and, shortly thereafter, Mantell told his attorney to terminate the agency agreement with Walker and to have Martin immediately discontinue the LazyTrim campaign. Mantell testified he terminated the agreement because he had received several threatening telephone calls at his Pennsylvania office from people who had seen the ad and because his father saw the advertisement and was very unhappy about his association with LazyTrim.

Martin complied with Mantell's wishes and pulled all of the LazyTrim advertisements using Mantell's endorsement from the market. After Mantell withdrew from the project, Martin had Walker locate another physician who would endorse the product. Dr. Robert Rogers agreed to become...