United States Court of Appeals
For the First Circuit
No. 08-1048
NEW ENGLAND SURFACES, d/b/a DION DISTRIBUTORS, INC.,
Plaintiff, Appellant,
v.
E.I. DU PONT DE NEMOURS AND COMPANY, d/b/a DU PONT,
and PARKSITE, INC.,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. George Z. Singal, U.S. District Judge]
Before
Boudin, Selya and Dyk,*
Circuit Judges.
Paul F. Macri with whom William D. Robitzek and Berman &
Simmons, P.A. were on brief for appellant.
Raymond Michael Ripple and John C. Wyman with whom Murtha
Cullina LLP was on joint brief for appellees.
September 23, 2008
*
Of the Federal Circuit, sitting by designation.
BOUDIN, Circuit Judge. E.I. du Pont de Nemours and
Company ("DuPont"), based in Delaware, is a well-known maker of
chemical and other products. In selling its solid surface
materials, DuPont for a number of years franchised distributors,
each with an exclusive marketing area or areas (referred to as the
franchisee's "GMA"). One of these distributors--Maine based New
England Surfaces ("NES")--held the exclusive franchise for much of
New England. The present appeal follows DuPont's termination of
NES, NES' law suit against DuPont and the district court's
dismissal of NES' claims.
NES, in various corporate incarnations, had for many
years distributed DuPont solid surface materials. Under its
franchise agreements, NES purchased the raw DuPont materials and
resold them, primarily to fabricators trained by NES, who made the
final products--for example, countertops--and resold them to
retailers or customers. In the last full year before being
terminated, NES sold more than $31 million of DuPont products, $27
million of which were of Corian, DuPont's leading (and highly
profitable) solid surface countertop material.
In 2000, DuPont entered into new franchise agreements
with NES covering three main surface product lines, to continue
indefinitely until terminated by either side, which was allowed
"with or without cause, upon at least thirty days prior written
notice." The agreements were to be "governed and construed in
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accordance with the laws of the state of Delaware without giving
effect to the conflict or choice of law provisions thereof."
Although not stated in the agreements, DuPont expected that
franchisees would not carry products that competed with the DuPont
lines carried by the franchisees.
The relationship between the parties began to deteriorate
in 2002. NES then held the franchises for Maine, Rhode Island and
two northern counties in Connecticut. In 2002, at DuPont's urging
NES acquired the struggling Connecticut-based company Kilstrom,
which had the DuPont franchise as distributor for the remainder of
Connecticut as well as Western Massachusetts. The purchase
included Kilstrom's 70,000 square foot office and warehouse in
Wallingford, Connecticut; fifteen NES employees thereafter worked
primarily in Connecticut.
Following the purchase, NES began to have difficulty
meeting DuPont-determined sales goals, which had been amended to
include Kilstrom's quota. The change in performance may have owed
something both to Kilstrom's condition and to the expiration of
DuPont's patent protection on Corian, which led to Asian producers
offering identical solid surface products at lower prices. It also
appears that public tastes were shifting towards surfaces like
granite that DuPont did not offer.
Other DuPont franchisees also encountered difficulties
and, in early 2003, a group of nineteen DuPont distributors (self-
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styled as the "G-19") joined together, aiming to present a "united
front" in negotiations with DuPont. Three of these distributors
(the "G-3") were selected to deal directly with DuPont, the
chairman being George Pattee, the president of Parksite, Inc., a
large DuPont franchisee based in Illinois. But the negotiations
did not bear fruit and DuPont began to express dissatisfaction with
the performance of NES and certain other franchisees.
By Fall 2003, NES had been placed on "critical review" by
DuPont for failing to meet its revised sales goals. On December 5,
2003, DuPont required NES to create a "corrective action plan" for
its performance difficulties and provide monthly-updated purchase
forecasts. On February 11, 2004, Charles Trapani, who would later
become president of NES, recommended (unsuccessfully) that NES
begin to develop a relationship with DuPont competitors. In
Trapani's words, NES was on a "slippery slope" with DuPont that was
certain to end badly.
In April 2004, DuPont sent another warning to NES. By
late 2004, DuPont's frustration with several distributors led it to
explore a new approach to distribution, which DuPont called its
"Route to Market Study." Parksite agreed to participate so that
the distributor point-of-view could be presented, but did not
initially disclose its role to its fellow G-19 members. Parksite
quickly became aware that the project was targeted at certain
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distributors and, fearing what would come next, initiated
discussions with DuPont, hoping that DuPont would acquire it.
Although Parksite later revealed the study to other G-19
members, it kept its negotiations with DuPont secret. By mid-April
2005, DuPont was discussing terminating NES and replacing it with
Parksite. Later that month, DuPont held meetings with NES,
following up with a further critical letter to NES. Thereafter,
Parksite refused to enter into a proposed G-19 agreement that
distributor-members would agree not to accept any part of the GMA
of a distributor terminated by DuPont without cause.
In October 2005, DuPont hosted a conference for
fabricators, which NES also attended, and unveiled its "Cool Deal"
promotion for 2006, which included substantial Corian price cuts
for both distributors and fabricators. NES held its own fabricator
conference in January 2006, looking toward the "Cool Deal"
promotion. By then, DuPont had already told Parksite privately
that NES would definitely be terminated. Nevertheless, in February
2006, DuPont invited all its distributors to participate in the
"Cool Deal" promotion--subject to conditions.
To participate, each distributor was required to submit
data about the retailers that the distributor was targeting for the
promotion, including the name, address, telephone number and
contact name for the retailer; and the amount of sales that the
distributor had made of a particular product series in 2005. In
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March, DuPont insisted that NES provide its complete customer list
with sales figures, claiming that the data was needed to track
results against the revised sales goals for distributors
participating in the program.
One week later, Parksite and DuPont executed an agreement
for Parksite to distribute Corian products in New England,
providing that it would take effect upon the "termination by DuPont
[of NES]." On April 4, 2006, at one p.m., DuPont notified NES that
it would be terminated as an exclusive distributor in thirty days
and be unable to distribute DuPont products at all thirty days
after that. Four hours later, DuPont sent a fax to fabricators,
retailers and builders in what had previously been NES' GMA,
announcing that NES was being terminated.
The next day representatives from both DuPont and
Parksite began visiting NES' customers, focusing attention on NES'
largest customers. NES alleges that several of its customers were
told that NES would be going out of business, although at the time
NES had no such plans. Customers were also informed that if they
wanted to ensure a continued supply of DuPont products they would
need to contract with DuPont and not NES.
In the six months following NES' termination, Parksite
and DuPont generated $15,440,789 worth of sales in NES' old region.
NES also attempted to acquire competing surface products but, with
a limited supply of customers and an inability to supply DuPont
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products, quickly began a slide into collapse. In May 2006, NES
sued DuPont and Parksite in federal district court in Maine based
on diversity jurisdiction, seeking immediate injunctive relief to
preserve its distributorship. The district court denied temporary
relief and, in December 2006, NES went out of business and later
sold its name and customer list to its former head for only $5,000.
Thereafter, in its pending district court lawsuit NES
sought damages on numerous grounds; the theories of central
importance on this appeal included (1) tort claims for fraudulent
and negligent misrepresentation, breach of fiduciary duty and
interference with contractual and prospective economic relations;
(2) a statutory claim under the Connecticut Franchise Act, Conn.
Gen. Stat. § 42-133l; and (3) breach of the covenant of good faith
and fair dealing arising out of the franchise agreements.
The district court dismissed certain of NES' claims as a
matter of law in October 2006 and after discovery granted
defendants summary judgment on others in mid-September 2007. In
late December 2007, the district court granted a renewed defense
motion in limine to exclude NES' proffered damages witnesses.
Based on this exclusion of evidence, the district court granted
judgment for defendants on the remaining claims, as they had
requested in the in limine motion, and this appeal followed.
On this appeal, NES first contests the district court's
in limine exclusion of NES' proposed testimony on damages and its
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consequent dismissal of NES' then-remaining claims. These
surviving claims stressed (first) DuPont's obtaining NES' customer
lists (claiming fraudulent and negligent misrepresentation and
breach of an implied covenant of good faith and fair dealing) and
(second) defendants' contacts with NES' customers after the
termination (claiming interference with contractual rights and
prospective economic advantage).
The district court's predicate for dismissing these
claims was the exclusion of NES' damages evidence, as set forth in
pretrial submissions and deposition testimony. That proposed
evidence was to be offered through John Berry, NES' chief financial
officer, whom NES designated an expert, and Robert Dion, NES' owner
and chief executive officer.1 This testimony was configured to
dovetail with NES' central contention that its termination by
DuPont was wrongful, which was the thrust of a number of its
original claims.
But those claims had already been dismissed when the
district court granted the motion in limine. By contrast, the
remaining claims which had survived that initial dismissal and
1
NES' damages expert John Berry estimated damages to NES as
$6,347,000--the remaining nine months of profits that it had
budgeted for sales of DuPont products in 2006. In addition, NES
pointed to DuPont's $15,440,789 in sales in the New England region
following the termination as sales that otherwise would have been
made by NES if defendants had not violated their duties to NES.
This number was significant because it closely hewed to what NES
had budgeted in sales for the year; NES argued that this was proof
that its budgeted profits were reliable.
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summary judgment asserted that Dupont and Parksite had by fraud and
misrepresentation frustrated NES' sales of DuPont products during
the sixty-day period (following notice but before termination
became effective) and lessened NES' ability to provide customers
competing products then or thereafter. In dismissing the remaining
claims, the district court explained:
Evidence of lost profits and loss of the value
of the company due to lost DuPont sales, while
relevant to any claims of unlawful termination
of the distribution agreements, is simply not
relevant to the claims that remain in this
case.
Although trial court decisions on the exclusion of
evidence are sometimes said to be reviewed for abuse of discretion,
e.g., United States v. Guerrier, 428 F.3d 76, 79 (1st Cir. 2005),
the reality is that the standard depends on the rationale for the
exclusion, which can be a matter of fact, law or logic. Cameron v.
Otto Bock Orthopedic Indus., Inc., 43 F.3d 14, 16 (1st Cir. 1994).
Whether lost profits was a rational basis for damages for the
claims made here may be closer to the law end of the spectrum,2 but
nevertheless we agree with the district court.
NES' projection of lost profits (based on the premise of
a continued franchise) did not show what NES had lost through
2
See, e.g., Lowe's Home Centers, Inc. v. General Elec. Co., 381
F.3d 1091, 1096 (11th Cir. 2004); Morley-Murphy Co. v. Zenith
Electronics Corp., 142 F.3d 373, 381-82 (7th Cir. 1998); General
Auto Parts Co., Inc. v. Genuine Parts Co., 979 P.2d 1207, 1212
(Idaho 1999); Szczepanik v. First S. Trust Co., 883 S.W.2d 648,
649-50 (Tex. 1994).
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DuPont's allegedly wrongful obtaining of NES' customer lists or
alleged misrepresentations to NES' former customers. Let us assume
that NES, unhindered by fraud or falsehood, could have rebuilt its
business with a new non-DuPont product. Even so, NES' projection
of earnings as a DuPont distributor would not be a reliable
indication of what its new post-termination business would have
earned.
First, whatever substitute product NES might have
procured would not have been labeled as DuPont Corian or assured a
similar profit. Second, NES would at best have been competing with
DuPont, itself selling Corian (at a newly reduced price) to New
England customers who had long purchased it. Third, DuPont already
had names of a number of those customers even if it did not know
their sales volume and even if some fabricators had been purchasing
Corian without their names having been registered with DuPont.
Maine courts, as elsewhere, allow prospective profits as
damages only if they can be estimated with reasonable certainty.
E.g., Eckenrode v. Heritage Mgmt. Corp., 480 A.2d 759, 765 (Me.
1984). Neither NES' pre-termination projections as a DuPont
distributor nor DuPont's actual post-termination sales shows what
NES was likely to earn selling a substitute product in competition
with DuPont. In all likelihood, NES' damage calculations were not
prepared to cover the contingency that its wrongful termination
claims might fail short of trial.
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NES argues that DuPont's misrepresentations began when it
led NES to think it would participate in the "Cool Deal" promotion;
and (NES argues) had it known in late 2005 that it was on its own,
an alternative source of supply could have been procured before
DuPont terminated NES. Even if so, projected Corian profits were
not a plausible forecast of NES' profits competing with DuPont.
Nor would DuPont likely have given NES more than thirty or sixty
days to develop a new supply source had termination occurred at an
earlier time.
NES also contends that were it not for DuPont's tortious
acts, NES would have retained the exclusive use of its customer
data, implying that DuPont would not have been able to compete
effectively with NES. But DuPont already was in possession of some
(although not all) of the customer names. And NES customers
unknown to DuPont would have had good reason to seek DuPont out
once NES was terminated. NES does not argue that, absent the name
and volume information it acquired, DuPont would not have dared to
terminate NES at all.
Any such misrepresentations would likely have caused some
injury by diverting some sales during the sixty days when NES could
still sell DuPont products. Or, NES might have tried to assign a
value to the customer list information before providing it to
DuPont. Courts are fairly generous in allowing reasonable
estimates as to damages, especially where intentional torts have
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occurred. See Restatement (Second) Torts, § 435B cmt. a (1965).
But no rational estimate on either theory was proffered.
Two related contentions by NES deserve brief mention:
first, that even assuming the motion in limine was properly
granted, the district court had no business moving from there to a
dismissal of the remaining claims because no summary judgment
motion or motion to dismiss was pending; and, second, that
exclusion of the damage testimony does not justify dismissal
because "lost profits would be only one method by which NES could
prove damage."
This might be a different case if NES had met the
dismissal with a claim of surprise, a motion for reconsideration
and a proffer as to how it expected to prove damages on the
remaining claims without the excluded testimony. It made no such
motion. Even now it does not explain what other evidence it had to
show specific dollar damages, short of the conclusory accusation
that DuPont's actions caused it to lose "goodwill."
Further, defendants' in limine motion did say that if the
motion were granted, NES' remaining claims would fail for lack of
any proof of damages, and then asked the district court to enter
judgment for the defendants. This request for judgment effectively
reiterated the defendants' request for summary judgment on these
claims. NES thus had an obligation to respond to this motion by
presenting any available evidence, such as non-expert testimony it
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planned to offer, that would support denial of the request for
judgment.
NES argues that its customer lists could be treated as
misappropriated assets and that DuPont had independently budgeted
to purchase them. But there is no indication as to a specific
amount budgeted by DuPont, nor any proposed testimony by an NES
witness offering an expert valuation. NES says it was not required
to produce such information in advance of trial which, if expert
testimony is at issue, is wrong. See Fed. R. Civ. P. 26(a)(2)(A).
In all events, NES should have told the district judge of this
fall-back theory.
Finally, NES makes two related arguments based on its
asserted potential to receive nominal damages for the alleged
wrongs committed by defendants. Initially, it claims that the
district court recognized that it was entitled to nominal damages,
and therefore it had the right to claim those damages at trial.
Then, it says that had it been awarded nominal damages, it would
also have been entitled to secure meaningful punitive damages.
Under Maine law, which the court applied to the remaining
claims, nominal damages may be awarded without proof of actual loss
in only two categories of tort cases neither of which are at issue
here, Horton & McGehee, Maine Civil Remedies § 15-2(d)(2), 331 (3d
ed. 1996); see also Vallely v. Scott, 138 A. 311 (1927) (stating
actual loss requirement). And, contrary to NES' argument, in Maine
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punitive damages are not available where only nominal damages are
awarded. Stacy v. Portland Publ'g. Co., 68 Me. 279 (Me. 1878); see
also Hall v. Edwards, 23 A.2d 889, 890 (Me. 1942) (noting rule in
Maine).3
On this appeal, NES has abandoned most of its claims
based on wrongful termination but it does rely on one closely
related claim, namely, a count asserting DuPont's liability under
the Connecticut Franchise Act. This statute protects franchisees
against termination without cause, even where the franchise
agreement allows termination in any circumstance, but applies "only
to franchise agreements . . . the performance of which contemplates
or requires the franchisee to establish or maintain a place of
business in [Connecticut]." Conn. Gen. Stat. § 42-133h.
If the statute applies, it overrides the termination
without cause provision in DuPont's franchise agreements, Conn.
Gen. Stat. § 42-133f(f) ("Any waiver [of the statute's rights]
which is contained in any franchise agreement . . . shall be
void."); but the district court ruled on summary judgment that the
agreements did not require NES to maintain a place of business in
3
Because the claim based on a fair dealing covenant sounds in
contract, arguably Delaware law governed (as the parties had agreed
for contract claims) and, under Delaware law, arguably punitive
damages are allowed based on nominal damages. See Marcus v. Funk,
No. 87C-SE-26-1-CV, 1993 WL 141864, at *1 (Del. Super. Apr. 21,
1993) (citing Restatement (Second) of Torts § 908 cmt. c (1979)).
However, NES did not raise this argument either on motion for
reconsideration, its briefs in this court, or at oral argument.
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Connecticut and that, whatever NES may have intended when it bought
Kilstrom, it was mere conjecture that DuPont had any belief as to
whether NES would maintain a Connecticut place of business.
Review on a grant of summary judgment is de novo both as
to pure legal issues and as to whether the evidence created a
material issue of fact requiring a trial. McGuire v. Reilly, 386
F.3d 45, 56 (1st Cir. 2004). A threshold question is what the
statute means by saying that the "performance" of a franchise
agreement "contemplates" a place of business in Connecticut. The
district court read this language to require that DuPont, as well
as NES, have a subjective expectation of an NES presence in
Connecticut.
It well might be enough if a reasonable party in DuPont's
position would foresee that NES would likely maintain Kilstrom's
existing place of business. The statute does not say that the
"parties" must both share a subjective intent and its main purpose
is to protect "Connecticut" franchisees, see H.R. Proc., 1972
Sess., p. 2777 (Statement of Rep. Webber). The statute's place of
business language also makes clear that a franchisee can qualify--
at least to the extent of its Connecticut operations--wherever its
headquarters. We could find no direct precedent, although case law
from other jurisdictions suggests that the place of business
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requirements in such statutes are generously construed in favor of
the franchisee.4
However, the difference between objective and subjective
intent may not matter here because what a reasonable person would
expect is relevant evidence of what DuPont did expect. And on the
present record (what the evidence at trial might show is a
different matter) a jury could believe two things: that DuPont
"knew" through those involved in its dealings with NES that
Kilstrom had a substantial physical footprint in Connecticut and
that--for NES to service customers in Connecticut far from its
Maine facility-- such a presence might well be maintained.
Kilstrom was DuPont's principal distributor in
Connecticut and DuPont could hardly be ignorant of how it operated.
In addition, DuPont added the former Kilstrom sales quota to that
of NES, informally promising NES promotional support. Absent other
facts, a jury could reasonably conclude that DuPont expected,
whether or not it cared, that to justify the Kilstrom purchase and
to meet its revised sales goals, NES would carry on Kilstrom's
place-of-business presence in Connecticut, thus triggering the
statute.
4
Dr. Pepper Bottling Co. of Paragould v. Frantz, 842 S.W.2d 37, 40
(Ark. 1992) (statute did not require agreement to refer to a fixed
location in state); Crone v. Richmond Newspapers, Inc., 384 S.E.2d
77, 80-81 (Va. 1989) (statute requires merely that "the business
transacted" have a "nexus" to Virginia).
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DuPont says that the statute was not meant to apply to
out of state businesses like NES. But the legislative history it
cites says only that an out of state franchisee is not protected
merely because the franchisor is a Connecticut company, which is
another matter entirely. 28 S. Proc., Pt. 10, 1972 Sess., p.3240-
41 (remarks of Sen. Kevin Johnston). This hardly suggests that an
out of state franchisee is unprotected where it maintains a
Connecticut place of business, at least to the extent of its in-
state franchise.
The question remains whether the statute can apply, given
that the franchise agreements provide that they are to be governed
by Delaware law. DuPont argues that the district court said no,
giving rise to an alternative ground which NES cannot challenge
because it did not brief the issue. By our reading, the district
court rested on the lack of a contemplated Connecticut base,
mentioning the choice of law provision only to indicate that the
parties never contemplated that NES would maintain a place of
business in Connecticut.
Indeed, DuPont merely cites the choice of law provision
as the district court's alternative ground without seriously
briefing it, but presumably DuPont could renew the Delaware law
argument if we merely remanded; this is primarily an issue of law,
but it may not be an easy question. Nor do we think it is resolved
in DuPont's favor by Northeast Data Systems, Inc. v. McDonnell
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Douglas Computer Systems Co., 986 F.2d 67 (1st Cir. 1993), which
was concerned only with a chapter 93A claim under Massachusetts
law, which (critically) contains no anti-waiver provision.
Because the district court's jurisdiction is based on
diversity, the question in part is what a Maine state court would
do with the choice of law provision. Klaxon Co. v. Stentor Elec.
Mfg. Co. Inc., 313 U.S. 487, 496 (1941). Maine, in deciding a
comparable issue, Baybutt Constr. Corp. v. Commercial Union Ins.
Co., 455 A.2d 914, 918 (Me. 1983), relied on the test set forth in
the Restatement (Second) of Conflict of Laws § 187 (1971), to
resolve such problems--a test whose application to the present
problem has divided other courts.5
Under the Restatement test, a forum selection clause can
abrogate state law that would otherwise apply in two situations.
The first is when "the particular issue is one which the parties
could have resolved by an explicit provision in their agreement
directed to that issue." Restatement (Second) Conflict of Laws §
187(1) (1971). However, the Connecticut statute voids any waiver
of its protection, Conn. Gen. Stat. § 42-133f(f), and under state
5
Compare Tele-Save Merchandising Co. v. Consumers Distributing Co.,
Ltd., 814 F.2d 1120 (6th Cir. 1987) (choice of law provision
applying law of New Jersey precluded application of Ohio Business
Opportunity Plans Act even though Ohio Act had explicit no-waiver
provision) with Modern Computer Sys., Inc. v. Modern Banking Sys.,
Inc., 858 F.2d 1339, 1342-45 (8th Cir. 1988) (agreement to apply
Nebraska law to franchise agreement would not abrogate franchisee's
right to protection under Minnesota Franchise Act).
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precedent this provision is construed to apply to choice of law
clauses. Pepe v. GNC Franchising, Inc., 750 A.2d 1167, 1168 (Conn.
Super. Ct. 2000).
Alternatively, a forum selection clause may be given
effect unless
application of the law of the chosen state
would be contrary to a fundamental policy of a
state which has a materially greater interest
than the chosen state in the determination of
the particular issue and which . . . would be
the state of the applicable law in the absence
of an effective choice of law by the parties.
Restatement, supra, § 187(2)(b). Connecticut's Franchise Act is a
fundamental state policy within the meaning of the Restatement, as
a directly pertinent comment makes clear.6 How to apply the
balancing test is perhaps a closer question.
Let us assume for argument's sake that Delaware's would
be "the applicable law in the absence of an effective choice of law
by the parties": does Delaware have "a materially greater
interest" than Connecticut in whether NES may be terminated without
cause? Connecticut has an affirmative policy of protecting local
franchisees from termination at will; it is far from clear that
6
Restatement, supra, § 187 cmt. g ("[A] fundamental policy may be
embodied in a statute ... which is designed to protect a person
against the oppressive use of superior bargaining power."); see
also Grand Light & Supply Co., Inc. v. Honeywell, Inc., 771 F.2d
672, 677-78 (2d Cir. 1985) (purpose of Connecticut Franchise Act to
"prevent a franchisor from taking unfair advantage of the relative
economic weakness of the franchisee").
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Delaware has any policy against such protection of franchisees
merely because the franchisor is incorporated in Delaware.
The only precedent we could find ourselves appears to
support NES. See Carlos v. Philips Bus. Sys., 556 F. Supp. 769,
774 n. 4 (E.D.N.Y. 1983), aff'd 742 F.2d 1432 (2d Cir. 1983), but
the issue has not been briefed by either side in this court, and we
are reluctant to carry the discussion further. The ground on which
the district court decided the issue is not persuasive to us; and
the alternative ground invoked (but not developed) by DuPont is not
so clearly conclusive as to make a remand pointless.
NES' remaining arguments as to claims not yet discussed
are readily answered. First, it says that the franchise agreements
were unconscionable insofar as they limited DuPont's liability for
termination of the agreement or for communications with prospective
customers incident to such a termination. One of the counts of the
complaint charged unconscionability, but the district judge
dismissed the claim pursuant to defendants' motion to dismiss,
saying that the controlling provision--allowing termination by
either side on thirty days notice--was reciprocal and not unfair.
Unconscionability is ordinarily a defense to a claimed
breach of contract, 8 R. Lord, Williston on Contracts § 18:1 (4th
ed. 2006), but NES may mean that the termination clause is invalid,
thereby leaving it with a contractual right to its franchise. Yet
insofar as the focus is on the right to terminate on thirty days
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notice, Delaware law rejects the defense unless the terms are "so
one-sided as to be oppressive" or there is "no reasonable relation
to the business risks involved." Tulowitzki v. Atlantic Richfield
Co., 396 A.2d 956, 960 (Del. 1978). A reciprocal right to
terminate, as between competent businesses, is neither one-sided
nor oppressive nor lacking in business purpose.
The provision immunizing communications with customers
possibly could be read so broadly as to raise unconscionablility
problems (for example, by immunizing dishonest statements about
NES); but the district court did not rely on it in rejecting the
tort claims relating to communications with NES customers, and it
was irrelevant to the outcome. The fatal flaw there was the lack
of specific damages tailored to the supposed wrong.
Second, NES contests the district judge's initial grant
of summary judgment on one other claim: that Parksite breached a
fiduciary duty owed to NES. NES argues that Pattee's role as the
lead representative of the G-3 created a fiduciary duty owed to the
remaining members of the G-19, including NES; and it says that
Pattee breached this duty by using his role to steer the Route to
Market study in its favor and then by failing to inform NES that
DuPont planned to terminate it.
The district judge held that there was no fiduciary
relationship between Parksite and NES, but there is a shorter route
to the same end. Whatever duty Pattee may have had to the G-19
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group with respect to any negotiations on behalf of the group, his
firm--like NES--remained independent in its distributor
relationship with DuPont. In fact, Parksite refused to sign an
agreement, circulated among G-19 members, whereby each member would
have pledged not to accept any part of the GMA of a distributor
terminated by DuPont without cause.
So, if there was some fiduciary responsibility, which is
perhaps doubtful, it was narrowly focused and the conduct
complained of was not within its scope. The Route to Market study
was not a project of the G-19, nor is there any claim that Parksite
obtained information in its capacity as a G-3 member that it used
to its advantage. Limited cooperation among business rivals does
not imply any general duty to look after each other's interests
beyond the joint undertaking.
The judgment of the district court is affirmed, save for
NES' claim based on the Connecticut Franchise Act. The judgment as
to that claim is vacated and the case is remanded for further
proceedings consistent with this decision. With the case thus
narrowed, the parties ought to consider the possibility of
settlement in lieu of further costly litigation. Each party shall
bear its own costs on this appeal.
It is so ordered.
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