Suburban Propane, a Div. of Nat. Distillers and Chemical Corp. v. Proctor Gas, Inc.
| Decision Date | 09 January 1992 |
| Docket Number | D,No. 1894,1894 |
| Citation | 953 F.2d 780 |
| Parties | 1991-2 Trade Cases P 69,692 SUBURBAN PROPANE, A DIVISION OF NATIONAL DISTILLERS AND CHEMICAL CORP., Plaintiff-Appellee, v. PROCTOR GAS, INC., and James Taranovich, Defendants-Appellants. ocket 91-7240. |
| Court | U.S. Court of Appeals — Second Circuit |
Gary H. Barnes and Robert A. Miller, Burlington, Vt, for defendant-appellant.
William B. Miller, Jr., John F. Evers and John L. Kellner, Middlebury, Vt., for plaintiff-appellee.
Before MINER, WALKER and McLAUGHLIN, Circuit Judges.
After a contractual business relationship between a gas supplier, Suburban Propane (Suburban) and a gas retailer, Proctor Gas, Inc. (Proctor) came apart, Suburban sued in the United States District Court for the District of Vermont (Lee P. Gagliardi, Judge ), for breach of contract and interference with its business relations. Proctor counterclaimed, asserting antitrust violations, breach of contract and interference with its business relations.
On appeal following a jury trial, we agree with Proctor that the district court's damage award in favor of Suburban on its contract claim cannot be sustained. In all other respects, we affirm the district court's judgments dismissing and denying all other claims and counterclaims.
Suburban is a national wholesale and retail distributor of propane gas for residential, commercial and industrial use. Suburban has an office in Rutland, Vermont, and distributes propane gas, also referred to as LP-Gas, directly to its Vermont customers "in bulk," by filling tanks installed at the customer's premises from Suburban's "bobtail" trucks. Starting in 1966, Suburban's Rutland office also distributed LP-Gas through Proctor. Proctor started distributing Suburban's LP-Gas in 1966 by the cylinder exchange method. Proctor would pick up 100-pound cylinders filled with LP-Gas from Suburban's Rutland facility, deliver them to retail customers, and retrieve empty cylinders for refilling at Suburban's Rutland facility.
In the late 1970s due to price competition from bulk dealers, Proctor's cylinder business started to decline. In 1983, Proctor sought to become one of Suburban's "investment dealers" whereby Proctor would also operate a bobtail truck and serve customers who had bulk gas tanks and other equipment on their premises. Suburban agreed and on October 11, 1983 Proctor's president, James Taranovich, executed two agreements on Proctor's behalf.
The first contract relating to bulk gas distribution, the "Investment Dealer Agreement" (IDA), required Proctor to: (1) notify all its customers that they were, in fact, Suburban's customers; (2) purchase LP-Gas exclusively from Suburban and to install and service "customer equipment," defined in the IDA as "all cylinders, tanks, regulators, meters fittings and related equipment which are or are intended to be installed on Customer premises and which are owned by Suburban;" and (3) purchase Suburban LP-Gas "in accordance with Suburban's applicable schedule of LP-Gas rates in effect at time of sale."
The second contract signed by Taranovich was the "Dealer Agreement 100 LB Cylinder" ("Exchange Cylinder Agreement"). It permitted Proctor to continue operating its exchange cylinder business and provided that Proctor "shall not distribute or sell any LP-Gas or LP-Gas equipment or cylinders not acquired from or approved by Suburban or permit any LP-Gas not acquired from Suburban to be used with or in Suburban's equipment or cylinders."
After Suburban agreed that Proctor could distribute bulk gas, Proctor purchased a bobtail truck. As Suburban made the larger tanks available, Proctor began to convert customers from exchange cylinders to bulk tanks. In early 1987, however, Proctor began to acquire bulk tanks from another supplier for reasons that were in dispute at trial. Taranovich maintained that he was dissatisfied with the quality of the tanks supplied by Suburban and the slow pace at which Suburban made them Subsequently, Suburban officials offered Proctor a choice: either sell the new non-Suburban tanks to Suburban and lease them back, or return them to their original vendors. Taranovich refused to do either.
available. Suburban contended Taranovich said only that he felt he needed more equity in his business than the bobtail truck he had purchased
Shortly after the meeting, Suburban's general counsel sent Taranovich a letter, dated May 18, 1987, stating that the purchase of "a significant quantity of LP-Gas equipment" was in default of the Exchange Cylinder Agreement. The letter threatened termination of the Exchange Cylinder Agreement within five days if Proctor failed to cure the default.
On June 19, 1987, Suburban refused to service Proctor's bobtail truck at Suburban's bulk LP-Gas facility. Later that day, Proctor received a letter from Suburban, dated June 17, 1987, terminating the Exchange Cylinder Agreement. The letter demanded receipt of all Proctor's customer agreements and records, and an accounting of all equipment, cylinders and LP-Gas obtained by Proctor under the Exchange Cylinder Agreement. There was no reference in the letter to the IDA.
Both Proctor and Suburban then scrambled for the customers Proctor had served as a Suburban dealer. Suburban ran local newspaper advertisements suggesting that customers served by Proctor should call Suburban directly for uninterrupted gas service. Meanwhile, Proctor told the customers that it would continue to serve them although it would no longer be a Suburban dealer. Proctor retained more than 90 percent of its customers.
In July, 1987, Suburban filed a state court complaint against Proctor and Taranovich claiming amounts due on account and damages for breach of contract as well as seeking injunctive relief to enforce non-competition covenants contained in the agreements. Later Suburban voluntarily dismissed its claim for injunctive relief as well as all claims brought against Taranovich individually.
Proctor timely removed the action to federal court based on the parties' diversity of citizenship and then filed an answer and counterclaims. The counterclaims, subsequently amended, alleged breach of contract, tortious interference with business relations, fraud, defamation, and violations of the federal antitrust laws.
Before trial, Chief Judge Franklin Billings granted Suburban's motion for summary judgment dismissing Proctor's antitrust claims. Subsequently, the case was tried to a jury by Judge Gagliardi.
The jury found that: (1) Proctor breached the IDA's exclusive-equipment provision; (2) as a result of this breach, Suburban suffered damages in the amount of $105,378; (3) Suburban did not breach the IDA; and (4) neither Proctor nor Suburban intentionally interfered with the other's customer business relations. After trial, Proctor moved for judgment notwithstanding the verdict. The district court denied the motion and entered judgment in favor of Suburban.
This appeal followed.
On appeal, Proctor argues the following: (1) Proctor did not breach the IDA because the agreement did not prohibit Proctor from using tanks acquired from sources other than Suburban; (2) Suburban failed to prove that it suffered any damage as a result of Proctor's supposed breach; (3) the district court erred when it excluded evidence on Proctor's breach of contract counterclaim; (4) the district court erroneously kept from the jury Proctor's claims for fraud and tortious breach of contract; (5) the district court erred by excluding Proctor's claim for punitive damages; and (6) the district court erroneously granted summary judgment to Suburban on Proctor's antitrust claims.
We agree that Suburban failed to establish damages for breach of contract, and therefore we vacate the damage award. However, in all other respects, we affirm the district court.
Suburban claimed and the jury found that Proctor breached the IDA by purchasing bulk tanks from other suppliers, rather than renting them from Suburban. Suburban's claim was based upon a contractual provision that (1) authorized Proctor to provide gas service to the Customers, and (2) obligated Proctor to "purchase its entire requirements of LP-Gas solely from Suburban" and to "Install and service Customer Equipment; ..." Elsewhere in the agreement, "Customer Equipment" was defined as "all cylinders, tanks, regulators, meters, fittings and related equipment which are or are intended to be installed on Customer premises and which are owned by Suburban."
At trial, Suburban argued that these provisions required Proctor to use only tanks that had been supplied by Suburban. While the word "only" did not appear in the text of the relevant provisions, Suburban asserted that the manifest intention of the agreement, read as a whole, supported its construction. The district court left to the jury the question of whether the IDA included this particular exclusivity agreement.
On appeal, Proctor argues that the district court erred in sending the question of Proctor's breach of the putative exclusivity provision to the jury. Proctor relies on Cross-Abbott Co. v. Howard's, Inc., 124 Vt. 439, 443, 207 A.2d 134 (1965), for the proposition that all valid covenants in restraint of trade must be explicitly stated. In Cross-Abbott the Supreme Court of Vermont stated that "[s]uch provisions restricting the liberty of doing business must be written into a contract with clear and unambiguous language and must not be left to inference or interpretation." Id. at 444, 207 A.2d at 139. Proctor's point is that since the pertinent IDA provisions did not clearly require it to purchase customer equipment exclusively from Suburban, the jury was asked to infer a restriction not contained in the agreement in contravention of Cross-Abbott.
We think Proctor's reliance on Cross-Abbott is misplaced. Cross-Abbott involved an equitable...
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