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Lightning Lube, Inc. v. Witco Corp.

filed: September 10, 1993; As Corrected September 20, 1993.

LIGHTNING LUBE, INC.; LASER LUBE, A NEW JERSEY CORPORATION
v.
WITCO CORPORATION; AVIS SERVICE, INC.; AVIS LUBE, INC.; AVIS ENTERPRISES, INC. DEFENDANTS/THIRD PARTY PLAINTIFFS V. RALPH VENUTO, INDIVIDUALLY AND D/B/A LASER LUBE, LIGHTNING LUBE, AND AUTOMOTIVE MANAGEMENT SYSTEMS; CAROL VENUTO, HIS WIFE, INDIVIDUALLY; AUTOMOTIVE MANAGEMENT SYSTEMS, INC., A NEW JERSEY CORPORATION THIRD PARTY DEFENDANTS WITCO CORPORATION, APPELLANT LIGHTNING LUBE, INC.; LASER LUBE, A NEW JERSEY CORPORATION V. WITCO CORPORATION; AVIS SERVICE, INC.; AVIS LUBE, INC.; AVIS ENTERPRISES, INC. DEFENDANTS/THIRD PARTY PLAINTIFFS V. RALPH VENUTO, INDIVIDUALLY AND D/B/A LASER LUBE, LIGHTNING LUBE, AND AUTOMOTIVE MANAGEMENT SYSTEMS; CAROL VENUTO, HIS WIFE, INDIVIDUALLY; AUTOMOTIVE MANAGEMENT SYSTEMS INC., A NEW JERSEY CORPORATION THIRD PARTY DEFENDANTS LIGHTNING LUBE, INC., T/A LASER LUBE, APPELLANT



On Appeal from the United States District Court for the District of New Jersey. (D.C. Civil No. 87-3243).

Before: Mansmann, Greenberg, and Lewis, Circuit Judges.

Author: Greenberg

Opinion OF THE COURT

GREENBERG, Circuit Judge.

TABLE OF CONTENTS

I. BACKGROUND

A. FACTUAL HISTORY

B. PROCEDURAL HISTORY

II. STANDARD OF REVIEW

III. WITCO'S APPEAL

A. TORTIOUS INTERFERENCE

B. BREACH OF CONTRACT

C. COMPENSATORY DAMAGES

1. Fed. R. Evid. 701

2. Damages not Proven with Reasonable Certainty

D. MISCONDUCT BY LIGHTNING LUBE'S COUNSEL

1. Mistrial

2. Refusal to Allow Kramer to Testify

3. Limiting the Witnesses' Testimony

4. General Prejudice Claim

IV. LIGHTNING LUBE'S CROSS-APPEAL

A. FRAUD

1. Nondisclosure of Intent to Compete

2. Misrepresentation of Intent to Fulfill the Contract

B. RICO

1. Section 1962(a)

2. Section 1962(b)

3. Section 1962(c)

4. Section 1962(d)

C. PUNITIVE DAMAGES

1. Ratification or Authorization

2. Payback Schedule

3. Cover-Up

4. Witco-Avis Venture

5. Credit Hold

6. Source of Oil Fraud

7. Glady's Activities

8. Counterclaim

V. CONCLUSION

These appeals arise from a civil action brought in the United States District Court for the District of New Jersey, in which a quick-lube franchisor, Lightning Lube, Inc. t/a Laser Lube (Lightning Lube), obtained a jury verdict for approximately $11.5 million in compensatory damages and $50 million in punitive damages against its motor oil supplier, Witco Corporation (Witco). Lightning Lube accused Witco of breaching its supply agreement and destroying Lightning Lube's relationship with its franchisees to benefit a competing quick-lube business that Witco had started with Avis Services, Inc. (Avis). Witco's actions allegedly caused Lightning Lube's existing franchisees either to abandon it or to hold back payment of royalty fees and resulted in large numbers of prospective franchisees never opening Lightning Lube centers. As a result, Lightning Lube lacked the cash flow necessary to continue operating and its owner, Ralph Venuto, was forced to sell its assets to another company for far less than their true worth.

Lightning Lube asserted six claims against Witco, but at the end of the trial, only four remained in the case: (1) breach of contract; (2) fraud and misrepresentation; (3) intentional interference with contracts and prospective contractual advantage; and (4) punitive damages. At the Conclusion of a three-month trial, the jury returned a verdict of liability on all four counts, though not on every claim within each count. The jury, however, found in favor of Witco on counterclaims to recover payment for unpaid charges for equipment and oil. Thereafter Witco moved for judgment as a matter of law or, in the alternative, for a new trial. The district court granted the motion in part and denied it in part in a comprehensive opinion dated September 2, 1992. See Lightning Lube, Inc. v. Witco Corp., 802 F. Supp. 1180 (D.N.J. 1992). In its opinion, the district court granted judgment and, alternatively, a new trial, on two of the fraud claims on which separate verdicts for $1.0 million each had been returned and on the punitive damages claims, but denied Witco judgment or a new trial on Lightning Lube's third fraud claim, on which no damages had been awarded, and on Lightning Lube's claims of tortious interference with economic relations and breach of contract. The court, therefore, left intact approximately $9.5 million of the approximately $61.5 million that the jury originally had awarded to Lightning Lube.

Witco now appeals from the district court's order of September 2, 1992, to the extent it denied Witco's motion as to the tortious interference and breach of contract claims. Lightning Lube cross-appeals from the district court's grant of judgment and a conditional new trial to Witco on Lightning Lube's fraud and punitive damages claims. It also appeals from the district court's pretrial order of February 19, 1991, granting summary judgment to Witco on Lightning Lube's RICO claims.*fn1 For the reasons discussed below we will affirm the district court's orders in their entirety.

We have jurisdiction pursuant to 28 U.S.C. § 1291. The district court had subject matter jurisdiction pursuant to 28 U.S.C. §§ 1331 (the RICO claims) and 1332 (all other claims). The parties are in agreement that New Jersey law governs the state law claims.

I. BACKGROUND

A. FACTUAL HISTORY

To the extent that the facts at trial were in dispute we state them in the light most favorable to the verdict winner, i.e, Lightning Lube on the complaint and Witco on its counterclaim for nonpayment for equipment and oil. From late 1985 until 1989, Lightning Lube was a quick-lube franchisor. Consumers go to a quick-lube center to have oil changes and related services performed on their vehicles in approximately ten minutes. As part of its franchise agreements, Lightning Lube agreed to provide oil, equipment, site-selection assistance, training, and marketing assistance to its franchisees in exchange for royalty and advertising fees. Lightning Lube grew out of the business of third-party defendant Automotive Management Systems, Inc., a franchisor of transmission and brake and muffler facilities run by the third-party defendant Ralph Venuto. Venuto and another person founded Lightning Lube in 1985, but in June 1986, Venuto bought out his partner's interest, and became the sole owner of the company.

From June 1986 to August 1987, Witco,*fn2 through a division called Kendall Refining Company,*fn3 sold motor oil to Lightning Lube and provided Lightning Lube franchisees with oil dispensing equipment. The Kendall division refines petroleum from its own wells and from other sources for use as automotive motor oil. Witco instituted a program for quick-lube national accounts and independent quick-lube operators, whose participants could purchase Kendall oil at a discount. Under this program, Witco would supply a quick-lube operator with lubrication dispensing equipment on loan, free of charge, on the condition that the operator sold Kendall oil through the equipment in a specified minimum quantity. Witco could repossess the equipment if the operator did not adhere to the minimum-use requirement.

In April and May 1986, Ralph Venuto met with representatives of Witco to discuss the possibility of Lightning Lube becoming a Witco quick-lube national account. At these meetings Venuto inquired whether Witco, in a departure from the industry norm, would consider loaning Lightning Lube money to purchase the lube equipment instead of loaning Lightning Lube the equipment itself. Venuto desired to buy his own equipment because he did not want to be obligated to use Kendall oil at a fixed price and quantity. At the time of his Discussions with Witco, Venuto also was negotiating with another oil refiner, Valvoline Oil Co. (Valvoline). According to Venuto, Valvoline ultimately offered to lend him $15,000 per center, to be repaid at 10% interest within 5 years, so that he could buy equipment and supply oil to his franchisees.

Eventually, however, when Witco agreed to Venuto's proposal that it loan him the money to buy equipment, Venuto decided to go with Witco rather than Valvoline. As Venuto explained at trial, Witco promised him real estate financing as well as a better interest rate on the money it lent him for the equipment and what he regarded as a better quality of oil -- 100% Pennsylvania crude oil -- than Valvoline offered.

On May 9, 1986, Venuto and Witco reached an agreement providing for Witco to lend Venuto money to purchase his own equipment, which he agreed to repay within five years, at six percent interest. Witco would retain ownership of the equipment during the payout period. Lightning Lube would be billed directly for the oil and then in turn would bill its franchisees for the product they purchased. Witco promised that it would charge Lightning Lube the lowest available price for the oil, which would be 100% Pennsylvania crude oil. Finally, Witco agreed to share the cost of signs promoting both Kendall oil and Lightning Lube. The benefit for Venuto under this agreement was that once Lightning Lube paid for the equipment it would not be obligated to purchase any particular amount of Kendall oil, and thus could purchase product from other suppliers.

Under its agreements with its franchisees, after it received the equipment from Witco, Lightning Lube rented the equipment to its franchisees at $35 per week for five years on the condition that the franchisees sell only oil products purchased from Lightning Lube. The agreements provided that Lightning Lube would retain ownership of the equipment. In addition, Lightning Lube was to receive 7% of the gross sales of each Lightning Lube franchise as a royalty fee and 4% of its gross sales as an advertising fee.

In June 1986, Witco began supplying Lightning Lube's franchisees with oil and equipment. The franchisees placed orders for motor oil with Lightning Lube which Witco distributors delivered directly to the franchisees. Soon after it commenced, however, the relationship between Witco and Lightning Lube began to dry up. In the first place, although Venuto made a request for a payback schedule for the equipment, Witco failed to provide a complete schedule for more than a year. Venuto complained that without such a schedule he could not pay for the equipment or prove to the franchisees that Lightning Lube had purchased the equipment, rather than rented it.

Disputes also arose between the two companies over the payments for oil and equipment. At various times during 1986 and 1987, Lightning Lube fell more than 90 days behind in its oil payments. As a result, in November 1986, Witco placed Lightning Lube on a one-month product hold, during which Lightning Lube could not buy motor oil from Witco, though Lightning Lube's franchisees could purchase oil directly from Witco at the same national account price Witco charged Lightning Lube. Lightning Lube's repeated failures to pay for its oil on time resulted in further product holds in 1987. Furthermore, in January 1987, when Lightning Lube became delinquent in its equipment payments, Witco advised Venuto that Lightning Lube would have to pay in advance for equipment installed at new locations.

During the period of the Witco-Lightning Lube relationship, numerous franchisees that had opened quick-lube shops either terminated their relationships with Lightning Lube or held back royalty payments, and others that had purchased Lightning Lube franchises decided not to open at all. From 1985 to 1987, Lightning Lube sold over 170 franchises. Yet, in total only between 30-40 franchisees actually opened. Ultimately, the failure of these franchisees either to open or to continue with Lightning Lube led to a cash shortage that crippled Lightning Lube's business. The reason that these franchisees and prospective franchisees ended their relationship with Lightning Lube was the critical issue at trial.

According to evidence presented by Witco, the franchisees terminated their relationship with Lightning Lube because Lightning Lube failed to honor its advertising obligations, did not assist in locating sites, and did not provide promised financial assistance. Some of these franchisees filed suits against Lighting Lube charging it with fraud, violations of the New Jersey Consumer Fraud Act, breach of contract, and other misdeeds.

Lightning Lube, however, presented evidence that Witco was responsible for the dissatisfaction and defection of the franchisees. Lightning Lube attributed its difficulties in servicing its franchisees to a cash shortage caused by franchisees terminating their agreements and demanding refunds or by their underpaying royalty fees. In Lightning Lube's view, Witco, by failing to provide a complete equipment payback schedule for more than a year, caused the franchisees to doubt whether Lightning Lube owned the equipment. Witco salespersons fanned these doubts by informing the franchisees that Witco, and not Lightning Lube, owned the equipment and that Witco would confiscate the equipment unless the franchisees agreed to defect from Lightning Lube. Rumors that Lightning Lube did not own the equipment and that its franchisees could lose their equipment were repeated at franchisee meetings in September and December 1986, and they led to several defections immediately after these meetings. Lightning Lube further claimed that Witco salespersons also destroyed franchisee confidence in Venuto by offering them free equipment and cheaper oil than Lightning Lube sold and by telling them that Venuto was "ripping them off."

Given his problems with Witco, as early as February 1987, Venuto began negotiating with Valvoline to lend him money for his payments to Witco and to replace Witco as Lightning Lube's supplier. Lightning Lube and Valvoline did not reach an agreement, and sometime in the middle of 1987, Venuto began negotiating with P & M Oil, an Exxon distributor. In August 1987, Venuto terminated his relationship with Witco and began using Exxon oil. As a consequence, the remaining Lightning Lube franchisees began selling Exxon's product. Nevertheless, Witco did not remove its equipment from the Lightning Lube franchises. According to Lightning Lube, the arrangement for Exxon oil came too late to cure the damage committed by Witco. As a consequence of Witco's actions, Lightning Lube lacked the capital to service those franchises still under contract, which in turn led to more franchisee dissatisfaction. Finally, what Lightning Lube regarded as its "death blow" came in October 1987 when, in response to Lightning Lube's filing this suit against it, Witco filed several counterclaims, one of which alleged that Lightning Lube had defrauded both Witco and its own franchisees by selling Kendall oil at a price in contravention of its agreement with Witco. Lightning Lube claims that Witco knew this claim had no factual basis. Nonetheless, Lightning Lube believed that it was required to disclose the allegation of fraud to prospective franchisees, a revelation which made it impossible for Lightning Lube to sell any more franchises. By July 1988, Lightning Lube's sales manager resigned due to the futility of trying to attract new franchisees. In the fall of 1989, Venuto sold Lightning Lube's remaining assets to Shamrock Energy Corporation for a price allegedly far below their true value.

According to Lightning Lube, Witco had two motives for trying to destroy Lightning Lube: first, Witco wanted to bypass Venuto to ensure that the franchisees purchased only Kendall oil; second, Witco wanted to benefit a new venture that it had started with one of Lightning Lube's competitors. In December 1986, Avis and Witco announced that they had reached an agreement providing that Witco, through a new subsidiary, Witco Realty Company, would form a partnership with a subsidiary of Avis, Avis Lube, Inc., a quick-lube competitor of Lightning Lube. The partnership, K & A Lube Properties, would finance the purchase of real estate and building construction for Avis Lube sites. The sites then would be leased to Avis Lube franchisees. Those Avis Lube centers which accepted Witco financing would be obligated to use Kendall oil and assorted products for 90% of their needs. In essence, then, Witco would be financing quick-lube centers which would compete with Lightning Lube. Throughout the trial, Witco maintained that negotiations between Witco and Avis did not begin until August 1986, and that the agreement was reached only in December of that year. Lightning Lube, however, contended that Witco and Avis had reached an informal agreement as early as April 1986, before Witco and Lightning Lube reached their agreement.

The timing of the Avis-Witco agreement was a key to Lightning Lube's case, because if the agreement had been reached prior to the Witco-Lightning Lube agreement, it could explain Witco's conduct toward Lightning Lube. Lightning Lube believed that Witco knew all along that it would form a partnership in the quick-lube business with Avis. Yet, it was very expensive to start a quick-lube franchise chain from the ground up. Accordingly, Lightning Lube believed Witco and Avis conspired to steal Lightning Lube's franchisees to save on the start-up costs. Thus, Lightning Lube contended that Witco in furtherance of this goal entered into its agreement with Lightning Lube in May 1986 in order to discover Lightning Lube's trade secrets and to gain access to its franchisees, whom it eventually could strip away.

B. PROCEDURAL HISTORY

On August 10, 1987, Lightning Lube filed this suit against Witco and Avis in the United States District Court for the District of New Jersey, asserting that they had engaged in a corporate campaign and conspiracy to destroy Lightning Lube. The complaint, as amended on May 8, 1989, alleged that Witco: (1) breached its agreement to provide Lightning Lube with motor oil, equipment, reimbursement for joint signs, and a payback schedule for the money Witco loaned Lightning Lube to purchase its equipment; (2) committed fraud by misrepresenting its intent to fulfill its contract with Lightning Lube, misrepresenting the source and quality of the oil it supplied, and failing to disclose that it intended to compete against Lightning Lube through a partnership with Avis; (3) intentionally interfered with Lightning Lube's relations with its franchisees and prospective franchisees; (4) unfairly competed against Lightning Lube through its partnership with Avis; (5) conspired with Avis to violate the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1962(a)-(d); and (6) committed price discrimination in violation of the Robinson-Patman Amendment to the Clayton Act, 15 U.S.C. § 13. In addition to the RICO allegations, the complaint included Avis as a defendant to all the other causes of action on the basis of its status as Witco's "partner, principal and joint venturer." The complaint sought compensatory, punitive, and treble damages as well as interest, costs, attorney's fees, and injunctive relief.

Witco filed an answer which denied liability and asserted counterclaims and third-party claims against Lightning Lube, Ralph and Carol Venuto, and Automotive Management Services, Inc. for the nonpayment for oil and equipment delivered to Lightning Lube.*fn4 Significantly, the counterclaims also included a charge that Lightning Lube had defrauded its franchisees by overcharging them for oil it purchased from Witco. Avis also filed an answer.

By an opinion and order dated November 27, 1990, the district court granted summary judgment to Avis on all the non-RICO claims. On February 19, 1991, the court granted Witco's and Avis's motion for summary judgment on the RICO claims and dismissed Avis from the case. The remaining claims against Witco were tried before a jury between February 3, 1992, and May 1, 1992. At the close of Lightning Lube's case, Witco moved for judgment as a matter of law pursuant to Fed. R. Civ. P. 50(a). The district court granted Witco's motion only with respect to the unfair competition and Robinson-Patman discrimination claims. At the close of all the evidence, Witco renewed its motion for judgment, and the district court reserved decision.

On May 4, 1992, the jury returned a verdict for Lightning Lube on almost all of its remaining claims. Specifically, in response to comprehensive interrogatories, the jury awarded Lightning Lube $2.5 million for breach of contract based on Witco's failure to provide an equipment payback schedule; $18,340 for breach of contract based on Witco's failure to provide advertising and sign allowances; $1 million for fraud based on Witco's failure to disclose its intention to enter the quick-lube market as a competitor of Lightning Lube; $1 million for fraud based on Witco's intention not to honor the agreement at the time it was entered; and $7,045,500 for tortious interference with Lightning Lube's relations with its franchisees and prospective franchisees. The jury also determined that Witco had committed fraud by misrepresenting that it would supply Lightning Lube with 100% Pennsylvania crude oil, but found that Lightning Lube sustained no injury from this misrepresentation. The jury further found that Witco did not breach its contractual obligation to sell motor oil to Lightning Lube at the lowest available price. The jury also awarded Lightning Lube punitive damages of $50 million on the fraud and tortious interference claims without a breakdown between them. However, the jury found for Witco on its counterclaim that Lightning Lube was indebted to it for payments due for equipment and oil.*fn5

Witco filed a posttrial motion for judgment as a matter of law or, in the alternative, for a new trial. On September 2, 1992, the district court granted Witco's renewed motion for judgment as a matter of law on the two fraud claims, for which the jury had awarded damages, and the punitive damages claim. See Lightning Lube, Inc. v. Witco Corp., 802 F. Supp. at 1203. In the alternative, the district court conditionally granted Witco a new trial on these fraud and punitive damage claims so that if its judgment as a matter of law were reversed there would be a new trial on those claims. Id. The district court, however, denied Witco's motion for judgment or a new trial on the tortious interference and breach of contract claims and also denied Witco's motion on Lightning Lube's claim of misrepresentation of the source and quality of the oil. Id. Witco appeals from the partial denial of its motion except as to the portion dealing with the source and quality of the oil. Lightning Lube cross-appeals, requesting that we reinstate the jury verdict on the fraud and punitive damage claims and reinstate the RICO claims on which the district court granted Witco summary judgment. Lightning Lube does not appeal from the district court's orders dismissing Avis from the case.

II. STANDARD OF REVIEW

We exercise plenary review of an order granting or denying a motion for judgment as a matter of law and apply the same standard as the district court. Wittekamp v. Gulf & Western Inc., 991 F.2d 1137, 1141 (3d Cir. 1993). Such a motion should be granted only if, viewing the evidence in the light most favorable to the nonmovant and giving it the advantage of every fair and reasonable inference, there is insufficient evidence from which a jury reasonably could find liability. Id. In determining whether the evidence is sufficient to sustain liability, the court may not weigh the evidence, determine the credibility of witnesses, or substitute its version of the facts for the jury's version. Fineman v. Armstrong World Indus., Inc., 980 F.2d 171, 190 (3d Cir. 1992), cert. denied, 122 L. Ed. 2d 677, 113 S. Ct. 1285 (1993). Although judgment as a matter of law should be granted sparingly, a scintilla of evidence is not enough to sustain a verdict of liability. Walter v. Holiday Inns, Inc., 985 F.2d 1232, 1238 (3d Cir. 1993). "The question is not whether there is literally no evidence supporting the party against whom the motion is directed but whether there is evidence upon which the jury could properly find a verdict for that party." Patzig v. O'Neil, 577 F.2d 841, 846 (3d Cir. 1978) (citation omitted) (quotation omitted). Thus, although the court draws all reasonable and logical inferences in the nonmovant's favor, we must affirm an order granting judgment as a matter of law if, upon review of the record, it is apparent that the verdict is not supported by legally sufficient evidence.

We review the district court's order ruling on a motion for a new trial for abuse of discretion unless the court's denial is based on the application of a legal precept, in which case the standard of review is plenary. Rotondo v. Keene Corp., 956 F.2d 436, 438 (3d Cir. 1992). Finally, we exercise plenary review of the order granting summary judgment to Witco on Lightning Lube's RICO claims. Coar v. Kazimir, 990 F.2d 1413, 1416 (3d Cir. 1993), petition for cert. filed, 62 U.S.L.W. 3060 (U.S. July 9, 1993) (No. 93-62).

III. WITCO'S APPEAL

A. TORTIOUS INTERFERENCE

We begin with Witco's argument that Lightning Lube failed to establish sufficiently its tortious interference claim. Under New Jersey law the five elements of a claim of tortious interference with a prospective or existing economic relationship are: (1) a plaintiff's existing or reasonable expectation of economic benefit or advantage; (2) the defendant's knowledge of that expectancy; (3) the defendant's wrongful, intentional interference with that expectancy; (4) the reasonable probability that the plaintiff would have received the anticipated economic benefit in the absence of interference; and (5) damages resulting from the defendant's interference. Fineman, 980 F.2d at 186; Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 563 A.2d 31, 37 (N.J. 1989). In formulating this definition of the cause of action, New Jersey courts have relied on the Restatement (Second) Torts §§ 766A and 766B. See, e.g., Printing Mart-Morristown, 563 A.2d at 37; Norwood Easthill Assocs. v. Norwood Easthill Watch, 222 N.J. Super. 378, 536 A.2d 1317, 1319 (N.J. Super. Ct. App. Div. 1988).

"An action for tortious interference with a prospective business relation protects the right 'to pursue one's business, calling, or occupation free from undue influence or molestation.'" Printing Mart-Morristown, 563 A.2d at 36 (quoting Louis Kamm, Inc. v. Flink, 113 N.J.L. 582, 175 A. 62, 66 (N.J. 1934)). Although businesses have the right to compete fairly with one another, that right does not extend to actions taken with the malicious purpose of harming a competitor's business. Thus, "what is actionable is 'the luring away, by devious, improper and unrighteous means, of the customer of another.'" Id. (quoting Louis Kamm, Inc., 175 A. at 66); see also Association Group Life, Inc. v. Catholic War Veterans, 120 N.J. Super. 85, 293 A.2d 408, 415 (N.J. Super. Ct. App. Div. 1971) (in determining whether interference is actionable, jury must find defendant's conduct "both injurious and transgressive of generally accepted standards of common morality or law"), modified, 61 N.J. 150, 293 A.2d 382 (N.J. 1972); Perlman, Interference with Contractual and Other Economic Expectancies: A Clash of Tort and Contract Doctrine, 49 U. Chi. L. Rev. 61, 78 n. 88 (1982) (citing New Jersey as an example of a jurisdiction "extending liability to cases where the defendant's actions are not independently unlawful" but are rendered "tortious solely because the intent, the result, or both were to disrupt a particular contractual relationship").

Lightning Lube predicated its tortious interference claim on allegations that Witco salespersons induced its franchisees to defect by: threatening to remove equipment; offering free equipment with the knowledge that Lightning Lube had contracts with the franchisees to supply equipment; defaming Venuto; offering to sell oil directly to the franchisees without telling Venuto; and intentionally delaying the delivery of a complete equipment payback schedule to Lightning Lube so as to raise doubts in the franchisees' minds as to whether Lightning Lube owned the equipment. Lightning Lube further alleged that Witco drove away prospective franchisees by asserting a counterclaim that accused Lightning Lube of fraud when Witco knew that there was no basis for such a claim.*fn6

Though it essentially concedes that the acts attributed to the salespersons, if they occurred, were improper, Witco denies that Lightning Lube demonstrated an injury by reason of these acts. New Jersey law requires that a plaintiff alleging tortious interference with existing or prospective advantage present proof that but for the acts of the defendant, the plaintiff "would have received the anticipated economic benefits." Printing Mart-Morristown, 563 A.2d at 37. See also Fineman, 980 F.2d at 186.*fn7 Witco argues that the evidence does not satisfy this standard, inasmuch as none of the witnesses testified that the franchisee relationship with Lightning Lube was severed because of anything Witco had done. But Witco concedes that there was testimony describing franchisee meetings held in September and December 1986, at which some Lightning Lube franchisees stated that Lightning Lube did not own the equipment, and that after these meetings approximately 14 franchisees terminated relations with Lightning Lube. However, Witco maintains that Lightning Lube failed to link these defections with any statements attributed to Witco salespersons. We disagree, as Lightning Lube did adduce sufficient evidence to permit a reasonable jury to conclude that these defections and others as well resulted from Witco's tortious statements.

In support of its claim of tortious interference, Lightning Lube offered the testimony of three Lightning Lube franchisees, Barry Vangarelli, Joseph Craig, and Alan Fischer, who recounted being threatened with the loss of their equipment if they did not leave Lightning Lube. Vangarelli testified that William Corwin, Witco's district sales manager, visited his shop in June 1987, and told him that if he were to use any other oil than Kendall, he ran the risk of having his equipment repossessed. "He said if you run in other kind of motor oil through your reel equipment, he said don't be surprised that if somebody won't walk in your door from [Witco] and dismantle it from your ceiling." Vangarelli also testified that Corwin told him that he was "being ripped off" by Venuto. Corwin promised him free equipment, stating that "if you walk away from Ralph and deal directly with me and [Witco], we'll come in, we'll put new reel equipment in for you and there won't be anymore rental charge."

Witco argues that Vangarelli's testimony does not show that Corwin's activities damaged Lightning Lube because Vangarelli remained a Lightning Lube franchisee through the trial. Yet Witco ignores Vangarelli's testimony that as a result of his conversation with Corwin he "lost trust in the Laser Lube concept" and that he discouraged approximately 25 to 35 prospective franchisees from signing up with Venuto. Vangarelli claims to have told them "not to get involved with it [Lightning Lube]. I felt I was being ripped off, the same would happen to them." Although on cross-examination, Vangarelli admitted that he had other problems with Venuto, unrelated to Witco, a jury reasonably could have believed that Witco's conduct influenced Vangarelli to discourage prospective franchisees. Indeed, Vangarelli testified that he began discouraging prospective franchisees only after Corwin spoke with him. Vangarelli also testified that soon after his conversation with Corwin, he stopped paying royalty fees to Venuto, at least in part because Corwin's comments affected his view of Venuto. "[Corwin] told me that I was being ripped off by [Venuto] and it sounded logical at the time."

Craig testified that he initially worked for Venuto as Lightning Lube's director of operations, and then considered becoming a franchisee himself. He claimed that a visit by Corwin changed his mind. Corwin offered him a deal if he were to go independent. The deal included the same Kendall oil at a cheaper price, free equipment, and signage and advertising dollars. Craig further testified that Corwin claimed that Witco was going to cut off Venuto. Corwin testified that but for these comments he would have joined Lightning Lube and that he repeated this information to other Lightning Lube franchisees. Craig also testified that after the December ...


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