Walt Peabody Advertising Service, Inc. v. Pecora

• Court: U.S. District Court — Western District of Kentucky
• Writing for the Court: ALLEN
• Citation: Walt Peabody Advertising Service, Inc. v. Pecora, 393 F.Supp. 328 (W.D. Ky. 1975)
• Decision Date: 07 January 1975
• Docket Number: Civ. A. No. C 74-409 L (A).
• Parties: WALT PEABODY ADVERTISING SERVICE, INC., Plaintiff, v. Rocco A. PECORA et al., Defendants.

393 F. Supp. 328

WALT PEABODY ADVERTISING SERVICE, INC., Plaintiff, v. Rocco A. PECORA et al., Defendants.

Civ. A. No. C 74-409 L (A).

United States District Court, W. D. Kentucky, Louisville Division.

November 26, 1974.

Supplemental Findings and Fact January 7, 1975.

Edwin F. Kagin, Jr., James R. Voyles, Louisville, Ky., Scott L. Mayorga and Henry Harber Rubin, Beverly Hills, Cal., for plaintiff.

F. Larkin Fore, Louisville, Ky., for defendants.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

ALLEN, District Judge.

This action is submitted to the Court on the motion of the plaintiff, Walt Peabody Advertising Service Inc., for a preliminary injunction following a two day evidentiary hearing, the presentation of oral arguments and briefs.

The factual background of this controversy is not too complex. Plaintiff is a Florida corporation engaged in the advertising business, insofar as it pertains to the bowling industry. Plaintiff does business in 48 of the 50 states of this country, and carries on its operations by entering into a very brief one page document entitled "Agreement" with the bowling alleys with whom it does business. Each of these Agreements provides that upon the furnishing of bowling score sheets and similar materials free-of-charge by the advertising agency to the bowling alley, the advertising agency is then authorized to place advertising on the materials which are furnished to the bowling alley and to retain all proceeds therefrom. The Agreement also provides that it will be in effect for 36 months from the date the first shipment of materials is received by the bowling alley, and that it is noncancelable during the three year period and will be automatically renewed thereafter, unless cancelled in writing by either party at least 90 days prior to the expiration of the Agreement.

Plaintiff has been very successful in the operation of its business and has procured Agreements with some 2,800 to 3,000 bowling alleys out of a total of approximately 10,000 doing business in this country. In the City of Louisville, plaintiff apparently had Agreements with 18 of the 22 bowling centers located here, all of which or nearly all thereof having been negotiated by defendants Rocco Pecora and his wife, Mary Jo Pecora.

On October 6, 1974, defendant Rocco Pecora mailed his resignation as Regional Manager of the plaintiff to the plaintiff's main office in Fort Lauderdale, Florida, where it was received on October 8, 1974. His wife, defendant Mary Jo Pecora, left the company at the same time, and within two days she and her husband had procured Agreements, for a firm entitled Action Advertising Associates, Inc., operated by Phil Pecora, a brother of Rocco Pecora, with 14 bowling centers, 13 of which were located in Louisville, Kentucky; 3 of the agreements were dated October 7th, 6 were dated October 8th, 1 was dated October 9th, 3 were dated October 11th, and 1 was dated October 19th.

Each of these Agreements were secured with bowling centers who had previously entered into Agreements with the plaintiff in either 1971 or 1972. With regards to the 1971 Agreements, the majority of them had been entered into in May and would, by their terms, have become automatically renewable in the absence of written notice received at least 90 days prior to their expiration in May, 1974. No such notice had been received by the bowling centers and all of these alleys were being serviced by the plaintiff at the time the defendants solicited their business and succeeded in procuring their Agreements for Action Advertising for periods of 36 months, with the exception of the Bowlarama Agreement which was for 12 months.

At the trial the proprietors or managers of five of the bowling centers testified as to their reasons for changing their alliance from plaintiff to Action Advertising. By and large the reasons given were to the effect that defendants had previously serviced their business and had done a good job, and were local residents, and therefore entitled to get their business. One of the bowling center managers, Mr. Franz, indicated that he had never seen the Agreement with the plaintiff, and a Mrs. Alvey testified to the same effect. The majority of the owners seemed to be under the impression that they had an absolute right to terminate the Agreements at any time. There was evidence that at least in one instance Rocco Pecora told the bowling lane proprietor that his contract had expired with the plaintiff and was of no effect. Pecora admitted making that statement but contended that he was ignorant of the automatic renewable clauses contained in the Agreements. Suffice it to say that this contention is without merit, inasmuch as he was the Regional Manager of the plaintiff and, for several months, had negotiated the plaintiff's Agreement with the bowling proprietors and had been instructed at a meeting held by the plaintiff in August, 1974 concerning the meaning of the contracts.

Evidence was introduced also to show that bowling alley proprietors, in many instances, do not regard their Agreements with advertising agencies which furnish score sheets to them as binding, except insofar as protection of advertisers who place their advertising on the materials furnished by agencies such as the plaintiff. It should be noted that it is the understanding of the plaintiff and its competitors to enter into advertising contracts for a period of 12 months, as opposed to the 36 month period which obtains for the bowling alleys.

There is also evidence to the effect that plaintiff had instructed its employees to solicit bowling alleys which were under contract to other advertising agencies during the times of their contract, and that it had, in fact, secured business from their competitors during the duration of the competitor's contract.

The evidence also shows that defendant Rocco Pecora had, at the time of his resignation, in his possession certain materials such as the "Person to Person" letters and the "Wanted Now" list, which were considered confidential by the plaintiff and which supplied information as to advertising contracts, dates of expiration of policy contracts, amounts paid by advertisers, and the correct amounts owing to the plaintiffs on the advertisers' contracts. While this information, insofar as it pertained to Louisville, had primarily been compiled by defendant Rocco Pecora, and while it was returned by him to the plaintiff following his resignation, it is apparent that possession of these documents was of some assistance to him in procuring the business of the bowling lanes as promptly as he and his wife did.

The law in Kentucky as to interference of contractual relations has an interesting history, quite dissimilar from that which obtains in the majority of jurisdictions. Originally it was held in Bourlier Brothers v. Macauley, 91 Ky. 135, 15 S.W. 60, 12 Ky.L.Rep. 737 that there was no cause of action stated by plaintiff when he alleged that a rival theatre had induced the famous actress, Mary Anderson, to break her contract with the plaintiff theatre and to appear at the rival theatre instead. While maliciousness or purpose to injure the plaintiff were not alleged, the Court of Appeals held that this was immaterial and that there was no cause of action. This holding was based on the dissenting opinion in the celebrated case of Lumley v. Gye, 2nd E1. & B1. 216, 75 E.C.L. 216. The gist of the dissenting opinion was to the effect that the injured party has his remedy against the other contracting party for breach of contract, whereas the majority held that a party to the contract has a property right therein which a third party has no more right maliciously to deprive him of or injure him in, than he would to injure his property, and that such an injury amounts to a tort.

In Brooks v. Patterson, 234 Ky. 757, 29 S.W.2d 26 (Ky.1930), the court pointed out that it has not followed altogether the rule in Lumley v. Gye, supra, and it confined recovery of damages to cases involving interference in contractual relations between master and servant, and where a person by coercion or deception has been procured against his will or contrary to his purposes to breach a contract. That opinion goes on to say on p. 762, 29 S.W.2d at 28 that "only those who are parties to or in some manner bound by the contract are liable for breach thereof, although the third party may have been actuated by malicious motives." The observation is then made that in Chambers and Marshall v. Baldwin, 91 Ky. 121, 15 S.W. 57, 12 Ky.L. Rep. 699, the subject is carefully considered and the holding made that "plaintiff could not maintain an action against a person who had procured another to breach a contract to sell and deliver his tobacco to him although such procurement was malicious." The court went on to observe however "that the ground upon which the right so to maintain the action was denied was that the act of defendant was not the direct or proximate cause of the plaintiff's damage, but rather the voluntary act of the seller of the tobacco, who had not been induced to break his contract by either force or fraud."

Close analysis of Brooks v. Patterson, supra, and its reasoning indicates then that in 1930 the rule in Kentucky was that damages may be recovered in cases involving interference in contractual relations only where a person by coercion or deception has been procured against his will or contrary to his purpose to breach a contract. Put in legal terminology, the conduct shown by the third party intermediary was to amount to either duress or fraud.

However, since the decision in Brooks v. Patterson, supra, the cases of Derby Road Building Co., Inc. v. Commonwealth of Kentucky, 317 S.W.2d 891 (Ky. 1958) and Coca-Cola Bottling Works v. Hazard Coca-Cola Bottling Works, Inc., 450 S.W.2d 515 (Ky.1970) have brought Kentucky law in accord with the majority rule which is stated in Alpha Distributing Company of California v. Jack...