# Petition — Shakespeare Co. v. Fury Imports, Inc. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385007_1063%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition - **Published:** January 1, 1981 - **Citation:** 450 U.S. 921 ## Text —_— Supreme Court, U. S. FILED IN THE Supreme Court of the Unites Hfdtes 8 OctToBER TERM 1980 MICHAEL RODAK, JR, CLERK SHAKESPEARE COMPANY, a Delaware Corporation Petitioner vs. FURY IMPORTS, INC., a New York Corporation Respondent PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT JOHN C. HOWARD HowarD & HOwaARD 407 Kalamazoo Building Kalamazoo, Michigan 49007 616-382-1483 Counsel of Record for Petitioner JAMES H. GEARY LITTLE & GEARY 107 West Michigan-Suite 301 Kalamazoo, Michigan 49007 616-344-1575 Pandick Press Midwest, Inc., Chicago °* 454-7600 QUESTIONS PRESENTED FOR REVIEW I. Whether a party’s admissions of damages in 1970 are properly excluded under Federal Rule of Evidence 403 if accrual of damages in 1970 bars the claim under the Statute of Limitations, and where the Court’s exercise of discretion is wholly unexplained. I]. Whether Federal Rule of Civil Procedure 41(a)(2) permits a party seeking to avoid a three year statute of limitations to withdraw. over objection, contested claims for damages suffered more than three years before the filing of its Complaint. II]. Whether under Federal law a Court may, in a diversity action. refuse to consider applicable state choice of law rules and foreign law, timely asserted before retrial, if consid- eration was previously denied on the grounds that foreign law had not been timely raised under Federal Rule of Civil Procedure 44.1. IV. Whether the failure of the United States Court of Appeals to apply applicable state law in a diversity case amounted to a refusal to follow this Court’s direction in Day & Zimmerman, Inc. v. Challoner, 423 US 3 (1975). TABLE OF CONTENTS QUESTIONS PRESENTED FOR REVIEW. .......000000.00..... REFERENCE TO OPINIONS BELOW......00000 occ eee CONCISE STATEMENT OF JURISDICTION .................. REFERENCE TO CONSTITUTIONAL AND STATU- FOR Fry a Be FD yas icscsienscccccssscacccecseciane REASONS FOR ALLOWANCE OF THE WRIT.............. I. MISUNDERSTANDING AND ABUSE OF FEDERAL RULE OF EVIDENCE 403 IS A RECURRING, IMPORTANT ISSUE OF FEDERAL LAW WHICH SHOULD BE AD- DRESSED BY THE SUPREME COURT .......... (A) The Exercise of Wholly Unexplained Dis- cretion To Exclude a Party’s Admissions of Material Facts Is a Misapplication of FRE 403 and an Example of the Chronic Abuse SEE NO as shhinscasesendbassact chiddamckanciectbinmabank: (B) This Case is An Example Of The Mis- application Of Rule 403 ............cc0ssscsccecscsseses I]. PERMITTING A PARTY SEEKING TO AVOID A THREE YEAR STATUTE OF LIMITA- TIONS TO WITHDRAW, OVER. OBJEC- TION, A CLAIM FOR DAMAGES SUF- FERED MORE THAN THREE YEARS BE- FORE THE FILING OF ITS COMPLAINT IS A SIGNIFICANT DEPARTURE FROM THE PURPOSE OF FED. R. CIV. P. 41(a)(2).......... The Interpretation Of Rule 41(a)(2) In- volves An Important Question Of Federal Law Which Ought To Be Resolved By This FN ii rales aia acho denenncnunencusiaedaalionaintaicdees Ii]. REFUSAL TO CONSIDER STATE CHOICE OF LAW RULES AND APPLICABLE FOREIGN LAW, TIMELY ASSERTED BEFORE RE- TRIAL, WHEN CONSIDERATION WAS PREVIOUSLY DENIED BECAUSE OF UN- TIMELY NOTICE UNDER FEDERAL RULE OF CIVIL PROCEDURE 44.1, PRESENTS A SIGNIFICANT QUESTION OF FEDERAL AE creek icdisigabiha sles wshidenidaesewcraseteahameiouetead lee mike 10 13 13 iil (A) Rejection Of Japanese Law On Retrial Was A Misapplication Of The “Law of The Case” EN viccaiicd- asia cdieses baaieas cuncsseedpliabipath vvennstss (B) Proper Application of the ‘“‘Law of the Case”’ Rule Would Not Permit Perpetration of Clear Error or Perpetuation of Manifest Noo sel sneictintaalsasiniennsacleiniehsiies IV. THE FAILURE OF THE COURT OF APPEALS TO APPLY APPLICABLE STATE LAW IN A DIVERSITY CASE AMOUNTED TO A REFUSAL TO FOLLOW THE DIRECTION OF DAY & ZIMMERMAN, INC. V. CHAL- CAI Fa FEF As OTIS cssccsaisincricndysssvicienesinne (A) The Court of Appeals Failed to Conform its Decision to Intervening, Controlling State DAUD hiss cisictuasskbsrsdensinatvarcucandAniceceeaiateserinnana (B) The Court Refused to Follow Applicable Law Because It Was Not Satisfied with the Result that Would Be Reached .................... See SET Gil tarsesvenrsiss eeciepb nanan ananeatieahaspniciennebinanens 15 18 20 20 iV INDEX TO APPENDIX Fifth Circuit Opinion September 8, 1980.......... la Fifth Circuit Opinion of December 3, 1980 RE TROD iain csiicssetencaciescsicaderasctiosenes 9a District Court order of August 11, 1978 Denying Judgment 0.0.V. .............ccccceseseeeeeeees lla Fifth Circuit Opinion of June 24, 1977.............. 13a District Court Opinion and Order of April 21, 1975 Granting Judgment N.0.V. ................0008 40a Excerpts from the Civil Code of Japan.............. 48a Florida Statute Annotated § 95.10 ................... 49a New York Civil Practice Law and Rules. SIE BA TR ciniccili cated tle a scncxeanactienithnnsdasens 49a Federal Rule of Evidence 403 ...............ceceeeeee 50a Federal Rule of Evidence 801(d)(2)(B), (C) NIE ee ictal esedla cdnstenitidseek weckensnchanshndpesadtons 50a Federal Rule of Civil Procedure 44.1................ 50a Judgment n.o.v. of April 21, 1975 oe Sla pa | a, SR ne 52a Shakespeare/Ohmori Contract.............:::cccseeeee 56a Amendment to complaint ................ccceceeeeeeeeeees 60a Letter of September 11, 1974................cccsscsseees 6la Judgment Of June 9, 1978 ...........ccccocrcscssscscecceees 62a Re Bac ee vetithantecinsedcencnprscesinchsistiedite 63a Excerpts Direct Testimony William Ciaccia...... 64a Excerpts Fury’s Counsel’s Comments to Court. 66a Excerpts Direc: Testimony Jack Morganstern.. 67a Proffer Re: Japanese Law ............cssscccccssesssesesees 68a Excerpts Direct Examination Sumio Takeuchi. 70a SEINE OE PUD vis cisniensnsicscanscisneretasierassnsss Tla Excerpts of Instructions Conference .................. 73a Excerpts Fury’s Motion for Directed Verdict.... 79a Excerpts Instructions Conference .................00+ 8la Excerpts Fury’s Final Argument........................ 85a SP alco di tite irae chisel cetickeainitamsouneaperinbond 85a Excerpt Fury’s Brief—Second Appeal............... 88a Excerpt Fury’s Brief—First Appeal................... 88a v INDEX OF AUTHORITIES Cases. Alamance Industries, Inc. v. Filene’s, 29\ F.2d 142 ( Ist Cir. ), cert. denied 368 U.S. 831 (1961 )........ Allison v. Mackey, 188 F.2d 983 (D.C. Cir. 1951) .. Babcock v. Jackson, 240 N.Y.S.2d 743 (Ct. App. Bankers Trust Co. v. Mallis, 435 U.S. 381 (1978) .. Beasley vy. Fairchild Hiller Corp., 401 F.2d 593 I ets naniieaneninnin Broderick Wood Products Co. v. U.S., 195 F.2d GREET IRE ee Pe ck eT Brown Machine Co. v. Merrow, 411 F. Supp. 1162 GS IY Ee A nn ee EOE a Bryce v. Wilde, 333 N.Y.S.2d 614 (App. Div.), aff'd. 340 N.Y.S.2d 185 (1972 )...............ccceeeeseeees Burkett v. Shell Oil Co., 487 F.2d 1308 (Sth Cir. Cochran v. M & M Transportation Co., 110 F.2d EI NS SRT Ore Connett v. City of Jerseyville, 110 F.2d 1015 (7th ERR SEE on Net ee a OR Day & Zimmerman, Inc. v. Challoner, 512 F.2d 77 EER Se ne Day & Zimmerman, Inc. v. Challoner, 423 U.S. 3 I a lca sins niennisthtabiepeemnsdpaneaniendentnenat Dior v. Milton, 155 N.Y.S.2d 443 (Sup. Ct. 1956), aff'd. 156 N.Y.S.2d 996 (1956)... ecceseeeeeees Dollar v. Long Mfg., N.C., Inc., 561 F.22 513 (Sth 5 IR ELE ee a aE Doran v. Petroleum Management Corp., 576 F.2d Be NR INT ah ncieninresneisnentngencththiciniaitedaieenetiionjpien PAGE 14, 15 1] 20, 27 10 20 1] 27 26 19 27 18 18 23 19-20, 21, 23, 24, 25 21-22, 26 12 vi Finn v. American Fire & Casualty Co., 207 F.2d SM ED © sicsincksatedntearbspracscnateeévisdasivuneese Glus v. Brooklyn Eastern District Terminal, 359 USS. 231 (1959) ........ SIRE) RS LS A SO RO ee Goodall v. Columbia Ventures, 374 F. Supp. 1324 SE ITE BL cas cacicensbabdcniadcedsnenasoudievevesencesores Government of Virgin Islands v. Felix, 569 F.2d I aii csicsasancntenbepsdauhesvescusesevecesees Guard-Life Corp. v. S. Parker Hardware Mfg. Corp., 428 N.Y.S.2d 628 (1980) ou... ..eeeceeeeeeeeeeee Haire v. Miller, 447 F. Supp. 57 (N.D. Miss. Hannigan v. Sears, Roebuck & Co., 410 F.2d 285 iiss k ics ciitienoccnndsienansunenatncconpestes Hartford Life Ins. Co. v. Blincoe, 225 U.S. 129 I aisiicodessntabdendinecbareabiitassossentvisessestanse Hartzell vy. Burdick, 398 N.Y.S.2d 649 (1977)........ H.B. Zachry Co. v. O’Brien, 378 F.2d 423 (10th Nee. umeepenanbees Hopkins v. Lockheed Aircraft Corp., 201 So. 2d 743 en ametnnncbnbsions John McShain, Inc. v. Cessna Aircraft Co., 563 I PE is cccossssinanscnsecasusscnsavosoooses Klaxon Co. v. Stentor Electric Mfg. Co., 313 US. AREAS SSS SE Ce a Long Island Ry. Co. v. Northville Industries Corp., 393 N.Y.S.2d 925 (Ct. App. 1977) oo... eeeeeeeeeeeee Mack vy. Clairol, Inc., 415 N.Y.S.2d 16 (App. Div. Mignon v. Tuller Fabrics Corp., 148 N.Y.S.2d 605 I SIE Bosna cassandneensgcunnssnatapioatoemicersisere Miller v. Poretsky, 595 F.2d 780 (D.C. Cir. 1978) .. Mishkin v. Dormer, 395 N.Y.S.2d 452 (App. Div. Morris v. Blume, 55 N.Y.S.2d 196 (Sup. Ct. 1945). Mourning v. Family Publications Service, Inc., 411 a schiiaculiidcetesedvconsnehes pebesings PAGE 17 10 21, 22, 26 8,9 6, 21, 22, 23, 26 27 25, 26 Vii Neiman-Marcus Co. v. Lait, 14 F.R.D. 159 (1953) Oliver v. Southern Ry. Co., 475 F.2d 895 (D.C. Cir. Reed v. McCord, 160 N.Y. 330, 54 N.E. 737 (Ct. Re Re set iiceints iasesinecsnessccdescsebapeinatiandeges Sacks v. Stewart, 427 N.Y.S.2d 20 (App. Div. State Farm Mut. Auto. Ins. Co. v. Peréix 186 F.2d Ee PE ls SEIN Sas cnabauchcstndciphesenvendtndbagebocbensieeeny Terry v. Pearlman, 42 F.R.D. 335 (1967) .............. U.S. v. Dolleris, 408 F.2d 918 (6th Cir. U.S. v. Dooley, 424 F.2d 1067 (5th Cir. 1970)........ U.S. v. Dwyer, 539 F.2d 924 (2d Cir. 1976) ............ U.S. v. Frick, 588 F.2d 531 (Sth Cir. 1979), cert. I RI TUNE i cciiiiciicoceossectostouibedbiodiescsvetes ‘U.S. v. Long, 574 F.2d 761 (3d Cir. ), cert. denied Ee TIT DB éci cbssvi cadindccdarcetassecdenceecensinedon U.S. v. McClain, 593 F.2d 658 (Sth Cir. 1979), EE I Ge tts PEO fhccinccpstssscesecnchedesdbdenesmseni U.S. v. McDaniel, 574 F.2d 1224 (Sth Cir. 1978), CREE, GRMIINEE GE Giiees DOS ainctbiccarsusnscsicsscicsscntsecesins U.S. v. McRae, 593 F.2d 700 ( 5th Cir. 1979) ......... U.S. v. Tuschman, 405 F.2d 688 ( 6th Cir. 1969)... Vandenbark v. Owens-Illinois Glass Co., 311 US. Ee IE Diisas scons baiedabiceacdh’ laubadsetincennentepiadeamianiabiii Wm. G. Roe & Co. v. Armour & Co., 414 F.2d 862 CE MEE I Ean cal das cotnssnsildivcéniceensssunsesraderdanudees 7% Vill Other. NG ee tack AOU © HE D strives nen cdasccadnnerssenes 1] 24 Am.Jur.2d, Dismissal, Discontinuance and Non- RUT ETO GE So ea 13 BP PAE FUE. 2, BE URIIIOR, S GUD occcscnncscscccccccnccccssccosses 10 Te PSOE. 2G, SUPUMMEIIIR, FF ccs ccciecesecccsscceccessusnssens 19,21 i a escenhdbnninoendaiieision 6, 13, 15 es 2. ssibebsivensnhinn Abus 2, & 35, %6, 17 a vehi dunempenenesgnaeiicians y SEATS Ee Ys Sg eT a a RO a 4 67,6 10, 11 12, 13 I a I Oe conkanenghontiaosan 9,11 F.R.E. 801(d)(2)(B), (C) and (D)................ccceeee 2,9 3 Moore’s Federal Practice J 15.11 ......cccccccccccceeeeeeees 17 6 Moore’s Federal Practice J 56.11 [6] .............:c006 10 Prosser on Torts, 4th Edition, § 129................ccc..eeee 21, 22 Restatement (second ) Torts § 766...............ccceeeeeees 6, 21 a sddudpueseniebiipevcns 2,6 Sn cll dled sti cecnasaninasuahmabonvedineene 2 1 Weinstein’s Evidence 4] 403[2 ] .............:cssseeeeeeees 7 1 Weinstein’s Evidence J] 403[ 3] 0.0... cecceeceeeseeeeee 11-12 Wright and Graham, Federal Practice Procedure: I cpeiaiubinane 7 No. Supreme Court of the Gnited States OCTOBER TERM 1980 SHAKESPEARE COMPANY INC., a Delaware Corporation Petitioner VS. FURY IMPORTS. INC., a New York Corporation Respondent PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT Petitioner, Shakespeare Company, a Delaware Corpo- ration, prays for issuance of a writ of certiorari to review the Judgment and Opinion of the United States Court of Appeals for the Fifth Circuit entered in this proceeding on September 8, 1980, with rehearing denied December 3, 1980. OPINIONS BELOW The Opinion of the United States Court of Appeals for the Fifth Circuit is an Opinion published at 625 F.2d 585 and entered September 8, 1980. A copy of the Opinion is included in the Appendix. The Fifth Circuit’s Opinion denying rehearing was entered December 3, 1980, in Fifth Circuit Docket No. 78- 2962 and is as yet unpublished. A copy is in the Appendix. 2 The Opinions of the Fifth Circuit affirmed an Order of the United States District Court for the Southern District of Florida entered in its Case No. 74-49 on August 11, 1978. The District Court’s Order was unpublished. A copy appears in the Appendix. A previous decision of the Fifth Circuit was entered June 24, 1977, with rehearing denied August 22, 1977. The Opinion was reported at 554 F.2d 1376. A copy appears in the Appendix. The Fifth Circuit’s previous Opinion reversed an unpublished Opinion and Order of the United States District Court for the Southern District of Florida entered on April 21, 1975, in its Case No. 74-49. A copy of the District Court’s Opinion and Order is in the Appendix. CONCISE STATEMENT OF JURISDICTION The Supreme Court has jurisdiction to hear this case on certiorari under 28 U.S.C. § 1254(1). A written Opinion was issued by the United States Court of Appeals for the Fifth Circuit on September 8, 1980. Petitioner, Shakespeare Com- pany, Inc., filed a timely Petition for Rehearing. Rehearing was denied on December 3, 1980. CONSTITUTIONAL AND STATUTORY PROVISIONS INVOLVED Relevant portions of the New York statute of limitations, the Florida borrowing statute, the Japanese civil code, Federal Rule of Evidence 403, Federal Rule of Evidence 801(d)(2)(B), (C) and (D), and Federal Rule of Civil Procedure 44.1 are set forth in the Appendix. CONCISE STATEMENT OF THE CASE On January 15, 1974, Fury Imports, Inc. (“‘Fury’’) filed a 28 USC § 1332 diversity action in the Southern District of Florida. Shakespeare Company’ (‘Shakespeare’) and South- ern Tackle Distributors (“STD”) were named as defendants. Fury’s amended Complaint of May 17, 1974, claimed Shakespeare “deliberately and willfully embarked upon a course of conduct ... purposely designed to interfere with the contractual rights” of Fury with Ohmori, a Japanese fishing reel supplier. (60a).* Fury and Ohmori had a written contract making Fury the exclusive distributor of a certain fishing reel. (52a) On June 10, 1970, Ohmori contracted with Shakespeare to stop selling to Fury within a year and to make Shakespeare his only customer (56a, 584). On September 10, 1974, the Fifth Circuit denied Shake- speare’s interlocutory appeal seeking a stay pending Japanese arbitration. On September 11, 1974, Shakespeare gave written notice of its intention to raise Japanese law barring punitive damages, the tort having been committed, if at all, in Japan (61a). Trial began September 19, 1974. Proofs showing the unavailability of punitive damages under Japanese law were received (43a, 69a) but on April 21, 1975, the District Court held Shakespeare’s notice of foreign law untimely under Rule 44.1 (42a). The Court held a stipulation of law, reflected in Shakes- peare’s notice of applicable Japanese law, was an agreement to apply New York law on punitive damages. (43a). The statute of limitations was a defense. Fury originally claimed that Florida’s statute of limitations applied (39a). All parties now agree that New York’s three year statute of limitations governs (4a). ‘Shakespeare Company is a wholly owned subsidiary of An- thony Industries, Inc., a Delaware corporation. * Parenthetical number references are to the appendix. 7% 4 Tortious interference is not a continuing tort under New York law. Fury’s claim was barred if the first tortious interference occurred before January 15, 1971. At the first trial, Fury claimed $9,327.24 in damages for 1970. The verdict included $35,278.88 for 1970 (32a). The District Court found the suit timely under Florida’s statute of limitations “‘as it was filed within four years of the act of inducement which occurred on June 10, 1970... .” (43a). A judgment n.o.v. was granted on April 21, 1975. (Sla) The Fifth Circuit agreed that Fury’s proof of damages was inadequate, but reversed and remanded for a new trial on all issues (34a-35a). The Appeals Court found punitive damages permissible under New York law. It did not disturb the District Court's interpretation of the stipulation of applicable law. No choice of law rules, or Japanese law, was discussed. The judgment in favor of STD was not appealed. STD is no longer a party to the action ( 15a-16a). On March 28, 1978, Shakespeare filed another Rule 44.1 written notice of its intent to raise Japanese law concerning punitive damages (Record 653). The retrial began May 23. 1978. The Court permitted Fury to withdraw, over objection, its 1970 damage claim (73a-8la). It refused to admit Fury’s attorneys’ claims that Fury was damaged in 1970, saying that it had authority to exclude the admissions under Rule 403 (84a-85a). The Court denied Shakespeare’s request to define “damages” to the jury. It refused Shakespeare’s requested jury instruction saying an “anticipatory breach” of contract by Ohmori could be “damage” to Fury ( 76a-78a, 81a). The Court’s instructions conveyed to the jury “that the Plaintiff was suing for inducement to breach, not for making performance more difficult” (8a). Through special inter- rogations the jury was asked whether the first “breach” of the Ohmori/Fury contract occurred after January 15, 1971. The jury determined Fury’s damages for each year from 1971 onward ( 86a-87a). Fury was awarded $931,391, including $600,000 in puni- tive damages. Shakespeare’s motion for Judgment n.o.v., was denied. The Court said “the relevant factual issues” on the statute of limitations had been submitted to the jury. It again held Shakespeare’s 1974 letter claiming Japanese law barred punitive damages to be an agreement to apply New York law on ptnitive damages. The Court also said that “even if New York’s choice of law rules are applicable, that law would allow the granting of punitive damages” (1la-12a). Shakespeare sought reversal because punitive damages were barred by application of Japanese law through the choice of law rules of Florida (the forum) or New York (the forum by stipulation ). Shakespeare also claimed that Fury’s admissions of dam- ages in 1970 were not properly withdrawn or suppressed and that the cleim was barred by the statute of limitations. The Court of Appeals acknowledged that its prior opinion did not “expressly decide which body of law controlled punitive damages,” (3a) but it refused to consider Japanese law or any choice of law rules, saying that its prior opinion implicitly made New York local law on punitive damages the “law of the case” (3a). The Appeals Court rejected consideration of all damages caused by Shakespeare’s interference in 1970 because Fury did not seek damages because Shakespeare made performance of its contract more difficult” (7a). The Court held that under New York law a “breach” or complete severance of the contractual relationship was a neces- sary element of the tort Fury sued on. *-* The Fifth Circuit upheld the exclusion of Fury’s claim of damages in 1970, under FRE 403. The Court did not discuss whether part of the claim for damages could be withdrawn over objection under FRCP 41(a)(2). It did not discuss whether Rule 44.1 permits a party to raise an issue of foreign law at retrial if it was not considered before because of untimeliness. Shakespeare petitioned for rehearing because the Court's September 8, 1980. opinion ignored Guard-Life Corp. v. S. Parker Hardware Mfg. Corp., 428 N.Y.S.2d 628 (1980), a May 1, 1980, decision of New York’s highest court. By adopting the Restatement (second) Torts § 766. Guard-Life rejected the dichotomy between “inducement to breach” and “interference with contract” that formed the basis of the Fifth Circuit's opinion. The Fifth Circuit denied rehearing. It acknowledged that no matter what name was applied. the tort was the same. However. it still refused to consider whether the damages claimed by Fury in 1970 commenced the running of the statute of limitations. It did not modify its holding that interference short of inducing a breach did not start the statute of limitations running. (9a-10a) Shakespeare now brings to this Court its Petition for Certiorari under 28 USC 1254(1). REASONS FOR ALLOWANCE OF THE WRIT I. MISUNDERSTANDING AND ABUSE OF FEDERAL RULE OF EVIDENCE 403 IS A RECURRING, IMPOR- TANT ISSUE OF FEDERAL LAW WHICH SHOULD BE ADDRESSED BY THE SUPREME COURT. (A) The Exercise of Wholly Unexplained Discretion To Exclude a Party's Admissions of Material Facts Is a Misapplication of FRE 403 and an Example of the Chronic Abuse of the Rule. The Supreme Court has not decided a case dealing with FRE 403 since the Federal Rules of Evidence were adopted. Chronic abuse and misapplication of Rule 403 has been described by respected Commentators and cautioned against by courts. In Wright and Graham, Federal Practice Procedure: Evi- dence § 5223 it is said: “Unhappily, it must be reported that some of the most conspicuous abuses of R«le 403 discretion are to be found in appellate opinions. Too often these opinions treat Rule 403 as a grant of unfettered discretion to the trial judge—‘“‘great discretion” in the words of one such opin- ion—rather than as a rule requiring a careful balancing of factors so as to check discretion. Worse yet is the use of discretion as a magic solvent for evidentiary issues on appeal. The unstated line of reasoning in this issue- ducking use goes something like this: the trial judge may have erred in excluding this evidence on grounds that it was hearsay, but since he could have excluded it under Rule 403 in any event, it is not necessary to discuss the hearsay error. This loose usage of Rule 403 by appellate courts is unfortunate for a number of reasons. First, it sets a bad example for trial courts whose method of exercising dis- cretion is substantially more important than any appellate application of the rule. Second, if every challenged ruling of the trial judge is to be buried beneath gobs of gooey discretion, it is difficult to see how we will ever have any of the ‘growth and development’ of the law of evidence that is enjoined by Rule 102. Finally, such appellate treatment of discretion, because of its visibility, may discredit the con- cept even if trial judges are much more responsible in exercising discretion and ultimately lead to efforts to replace Rule 403 with something more like the mandatory rule that was originally proposed.” | Weinstein’s Evidence 9403[2] says: *... Rule 403 should be applied infrequently and cau- tiously by trial judges. When it is used, a clear statement of the reason should be made for the record. . .” U.S. v. Long, 574 F.2d 761, 766 (3d Cir. ), cert. denied 439 U.S. 985 (1978) held: “Where an objection does invoke Rule 403, the trial judge should record his balancing analysis to the extent that his exercise of discretion may be fairly reviewed on appeal.” John McShain, Inc. v. Cessna Aircraft Co. 563 F.2d 632, 635 (3d Cir. 1977) held that: “T]he balance required [by Rule 403] is not a pro forma one. A sensitive analysis of the need for the evidence as proof of a contested factual issue, of the prejudice which may eventuate from admission, and of the public policies involved is in order before passing on such an objection. The substantiality of the consideration given to competing interests can be best guaranteed by an explicit articulation of the trial court’s reasoning.” See also authorities cited in Miller v. Poretsky, 595 F.2d 780, 794 n.41 (D.C. Cir. 1978) (Robinson J. concurring ): Government of Virgin Islands v. Felix, 569 F.2d 1274, 1280 (3d Cir. 1978): and U.S. v. Dwyer, 539 F.2d 924, 928 (2d Cir. 1976). In this case the District Judge used Rule 403 to keep from the jury admissions of Plaintiffs counsel on a key issue of fact. His exercise of discretion was wholly unexplained. The Court of Appeals upheld, without requiring the trial court to explain the exercise of its discretion. The Fifth Circuit thus implicitly put itself in conflict with at least three circuits. If Fury was damaged in 1970 as a result of Shakespeare’s tortious interference, its claim was barred by the statute of limitations. At the first trial Plaintiffs lawyer said that Fury was “entitled to a directed verdict for the year 1970 beyond any question... I feel that we are entitled to one on the issue of breach of contract” (7la). He told the jury that: ‘We claim our damages in the year 1970 were $9,327.24” (72a). 9 On retrial Shakespeare offered these statements under FRE 801(d)(2)(B)(C) & (D) (7la-72a, 82a-83a). Fury opposed introduction saying that “nothing could be further from the truth” than to say Fury was claiming damages in 1970-( 84a). On retrial Fury claimed it didn’t suffer damages until 1973, because it had “back-ordered” reels in 1970, 1971 and 1972 (80a). It told the second jury ‘“‘we haven’t asked for damages in the year 1970 because we got our order that year” (85a). The trial judge ducked the hearsay issue, saying: “It may come under 801 or it may not” (84a). He avoided determining relevancy, saying only: ““You are not permitted to argue in terms of saying that [ Plaintiff's Counsel] at the last trial argued this. I think that that is frocked with prejudicial aspects. And even though it might be relevant, I think 403 would permit me to exclude it” (84a-85a). There was none of the careful, “delicate,” explicit balanc- ing on the record of competing interests that would have been required in the Second, Third or D.C. Circuits. See Government of Virgin Islands v. Felix, 569 F.2d 1274, 1280 n.13 (3d Cir. 1978); U.S. v. Long, supra; U.S. v. Dwyer, supra and Miller v. Poretsky, supra. The Court of Appeals did no better. It did not mention FRE 801. It demurred on the question of relevancy under Rule 401 and said: ‘“*{ T]he trial judge was within his discretion in excluding it under Rule 403, which allows the exclusion of relevant evidence if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury” (8a). The Court cited as authority U.S. v. Frick, 588 F.2d 531 (Sth Cir. 1979), cert. denied 441 U.S. 913 and U.S. vy. McDaniel, 574 F.2d 1224 (Sth Cir. 1978), cert. denied 441 U.S. 952, cases involving inflammatory evidence about the adverse 10 party’s possible involvement in sexual misconduct or member- ship in an undesirable social group. By failing to require the trial court to articulate its reasons for exclusion under Rule 403, the Court implicitly held that no such explanation was required. Certiorari should be granted to resolve the conflict among the circuits and to exercise the Court’s power of supervision. Lower courts should be directed to give sufficient indications of the bases of their decisions under Rule 403 to make meaningful appellate review possible and to assure that the Rule is applied rationally and in keeping with its purposes. The question of the proper application of Rule 403 “is important and recurring,” Glus v. Brooklyn Eastern District Terminal, 359 U.S. 231, 232 (1959). Certiorari should be granted to finally resolve the question. (B) This Case Is an Example of the Misapplication of Rule 403. Arguments of Counsel made to a Court bind the client. Courts act on the oral concessions and admissions of lawyers. Bankers Trust Co. v. Mallis, 435 U.S. 381, 388 (1978); U.S. v. Dooley, 424 F.2d 1067 (Sth Cir. 1970); Mourning v. Family Publications Service, Inc., 411 U.S. 356, 362 n.16 (1973). 29 Am. Jur. 2d, Evidence § 615 says: ‘Judicial admissions are evidence against the party who made them... and may constitute the basis of a verdict, whether made in writing or orally by counsel, or informally by the testimony of a party.” If Fury’s lawyer had claimed damages for 1970 in his opening statement, the Court could have considered his oral admission in directing a verdict. Oliver v. Southern Ry. Co., 475 F.2d 895, 897 (D.C. Cir. 1972). The admissions to be considered in deciding a Rule 56 Motion “may be established in any appropriate manner [in- cluding] statements of counsel made in oral or written argu- ment...” 6 Moore’s Federal Practice J 56.11[6] 11 The admissions would have been properly considered had they been made in a pretrial statement (Broderick Wood Products Co. v. U.S., 195 F.2d 433, 435 (10th Cir. 1952)) ora pleading ( Allison v. Mackey, 188 F.2d 983 (D.C. Cir. 1951)) or a superseded pleading. State Farm Mut. Auto. Ins. Co. v. Porter, 186 F.2d 834 (9th Cir. 1950); Annot., 52 A.L.R.2d 516, 523 (1959). A lawyer’s statements made with the authority of his client on a matter for which the lawyer has been retained are the admissions of the client. U.S. v. Dolleris, 408 F.2d 918 (6th Cir. 1969); U.S. v. Tuschman, 405 F.2d 688, 690 (6th Cir. 1969). Under FRE 801(d)(2)(C) & (D) these admissions are not hearsay. [A ]dmissions by a party of any fact material to the issue are always competent evidence against him, wherever, whenever, or to whomsoever made ...” Reed v. McCord, 160 N.Y. 330. 54 N.E. 737 (Ct. of App. 1889). The admissions of a party have “considerable probative value.” H.B. Zachry Co. v. O’Brien, 378 F.2d 423, 425 (10th Cir. 1967). Evidence of great probative value should not be “excluded in the absence of a significant showing of unfair prejudice.”” U.S. v. Dwyer, 539 F.2d 924, 928 (2d Cir. 1976). Rule 403 permits rejection of relevant evidence: “If its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury...” The Advisory Committee’s note to Rule 403 says: **Unfair prejudice’ within this context means an undue tendency to suggest decision on an improper basis, com- monly, although not necessarily, an emotional one.” Weinstein’s Evidence 9 403[03] says: “Evidence that appeals to the jury’s sympathies, arouses a sense of horror, provokes its instinct to punish, or triggers 12 other mainsprings of human action may cause a jury to base its decision on something other than the established propositions in the case.” Fury did not claim that admission of its lawyer’s claim of damages in 1970 would arouse in the jury a sense of sympathy or horror or that it might provoke an instinct to punish, or trigger some other mainspring of human action. Fury argued against admission because its theory of recovery had changed from the first trial (80a). Fury’s denials of facts it had previously admitted simply made “a case of conflict of testi- mony” to be determined by a jury. State Farm Mut. Auto. Ins. Co. v. Porter, 186 F.2d 834, 844 (9th Cir. 1950). **|U)nfair prejudice’ as used in Rule 403 is not to be equated with testimony simply adverse to the opposing party. Virtually all evidence is prejudicial or it isn’t material. The prejudice must be ‘unfair’”’. Dollar v. Long Mfg., N.C., Inc., 561 F.2d 613, 618 (Sth Cir. 1977) Neither Fury. the District Court nor the Fifth Circuit described the “unfairness” of letting the jury hear admissions that might have caused Fury to lose its case. If the evidence was excluded simply because it was damaging, then Rule 403 was grossly misapplied. “Unless trials are to be conducted on scenarios, on unreal facts tailored and sanitized for the occasion, the application of Rule 403 must be cautious and sparing. Its major function is limited to excluding matter of scant or cumula- tive probative force, dragged in by the heels for the sake of its prejudicial effect. * * * “It is not designed to permit the court to ‘even out’ the weight of the evidence, to mitigate a crime, or to make a contest where there is little or none.” U.S. v. McRae, 593 F.2d 700. 707 (5th Cir. 1979). 13 The result of the misapplication of Rule 403 here was to ‘even out’ the evidence. Rather than preventing a trial conducted “on unreal facts,” the Court’s decision encouraged it. Suppression of highly probative, relevant admissions, in the absence of substantial and unfair prejudice is a significant departure from the accepted and usual course of judicial proceedings. This departure, the absence a decision of this Court explaining Rule 403 and likely continued misapplication of the Rule urgently require the grant of Certiorari. PERMITTING A PARTY SEEKING TO AVOID A THREE YEAR STATUTE OF LIMITATIONS TO WITHDRAW, OVER OBJECTION, A CLAIM FOR DAMAGES SUFFERED MORE THAN THREE YEARS BEFORE THE FILING OF ITS COMPLAINT IS A SIGNIFICANT DEPARTURE FROM THE PURPOSE OF FED. R. CIV. P. 41(a)(2). The Interpretation Of Rule 41(a)(2) Involves An Important Question of Federal Law Which Ought To Be Resolved By This Court. Rule 41(a)(2) prohibits withdrawal of a claim if an answer has been filed, where prejudice to the Defendant will result. Permission of the Court is required in any event. This Court has never interpreted Rule 41(a)(2). The general rule is that: ‘“{A] voluntary termination may be entered in actions at law by a plaintiff as to part of the cause of action he alleges where such a termination does not prejudice the rights of other parties.” 24 Am. Jur. 2d, Dismissal, Discontinuance and Nonsuit, § 10. Fury withdrew its claim for damages for 1970. Its lawyer called its damages in 1970 “insignificant,” saying that Fury *> 14 didn’t “want to get into an argument over that amount of damages. . .”” (67a) Shakespeare objected to withdrawal of the claim for damages for 1970. [ Fury’s Counsel]: No sir, we do not have 1970 before the jury. We, of course, withdraw that claim.” The Court: “You don’t think that they can withdraw it if they want to?” | Shakespeare’s Counsel ]: 1 am objecting to it your honor” (72a). The Court permitted the withdrawal. In instructing the jury the court tried ‘to eliminate any dispute regarding 1970,” (76a) which was accomplished in part by asking the jury, through a special verdict, to state the “damages sustained by the Plaintiff in each” year from /97/ to 1978, (87a). The first jury assigned damages in each year from /970 to 1974 (18a). The purpose of Rule 41(a)(2) is to. prevent dismissals which unfairly affect the defending party. Alamance Industries Inc. v. Filene’s, 291 F.2d 142, 146 (1st Cir.), cert. denied 368 U.S. 831 (1961); Neiman-Marcus Co. v. Lait, 14 F.R.D. 159 (1953); Terry v. Pearlman, 42 F.R.D. 335 (1967). Neither lower court made an effort to decide if Shakes- peare was prejudiced by partial withdrawal of Fury’s claim, which would have been barred had there been damages in 1970. By permitting withdrawal of a claim for damages in 1970, and suj _ressing admissions of damage in 1970, the Court effectively took from the jury the question of whether or not there had been any damages in 1970. Shakespeare was prejudiced. The withdrawal of the claim was made at trial. Shakes- peare had no opportunity to adjust its trial strategy to respond to the withdrawal. Shakespeare was unfairly affected because Fury was permitted to conceal from the jury every indication of its admissions and claims of damage in 1970. 15 The Fifth Circuit sanctioned a significant departure from ordinary and accepted judicial practice. Its sub silentio holding on Rule 41(a)(2) is in conflict with the holding of the First Circuit in Alamance Industries, Inc. v. Filene’s, supra. This Court should grant certiorari to resolve the conflict between the Circuits, to remedy the serious departure from accepted practice and to definitively interpret Rule 41(a)(2). Ill. REFUSAL TO CONSIDER STATE CHOICE OF LAW RULES AND APPLICABLE FOREIGN LAW, TIMELY ASSERTED BEFORE RETRIAL, WHEN CONSID- ERATION WAS PREVIOUSLY DENIED BECAUSE OF UNTIMELY NOTICE UNDER FEDERAL RULE OF CIVIL PROCEDURE 44.1, PRESENTS A SIGNIFI- CANT QUESTION OF FEDERAL LAW, (A) Rejection of Japanese Law on Retrial Was a Mis- application of the “Law of the Case” Doctrine. Shakespeare’s September 11, 1974, notice of intent to raise an issue of foreign law was rejected as untimely (42a). The notice was part of a letter from Shakespeare's lawyer to Fury’s lawyer summarizing the parties’ agreement on applicable law as follows: “This will confirm our telephone conversation in which | told you that if a question of choice of law arose between New York and Florida, I believe that the New York law would be applicable. You indicated to me that you were in accord with this principle. I also mentioned to you that Japanese law might be applicable. Accordingly, I want to put you on notice, pursuant to Rule 44.1, that an issue of foreign law may be involved in this case.” “The precise issue of Japanese law involved is the absence, under Japanese law, of a right to claim punitive damages” (61a). In its April 21, 1975, Order on post-trial motions the Court said: 16 “The defendant, through a motion to strike filed Septem- ber 11, 1975 [sic], just eight days prior to the com- mencement of trial, and through a letter notice of the same date, first informed the Court and the plaintiff respectively of the possible application of Japanese law. This notice was not reasonable within the intendment of Federal Rule of Civil Procedure 41.1” (42a). The District Court interpreted the stipulation as an agree- ment by Shakespeare to apply New York law on punitive damages (43a). On the first appeal the Fifth Circuit refused to disturb this interpretation of the stipulation. The Court did not then decide the underlying question of whether Japanese law was properly applicable to this case (39a). Although this was a diversity action, it did not consider any state choice of law rules. The Trial Court was not explicitly directed to apply New York local law on punitive damages. Instead it was told that it “was not bound to follow a stipulation as to a question of law” (39a). Two months before retrial Shakespeare filed written notice of its intent to raise Japanese law (R. 653). Fury did not question the timeliness of this notice. Proofs were again offered to show that Japanese law did not permit punitive damages (48a-49a, 70a-7la). After trial, Shakespeare's choice of law position was again rejected. The Court found New York’s choice of law rules ““anomolous and unjust” and that the parties agreed to apply New York law on punitive damages. The Court held alternatively that Japanese law would not be applicable under New York choice of law rules (12a). “‘Law of the case” was not one of the reasons given by the District Court for rejection of Japanese law. The Court of Appeals sanctioned the refusal to consider application of Japanese law saying: “In our prior opinion we did not expressly decide which body of law controlled punitive damages. However, we implicitly adopted New York law as determinative.” * + + 17 At the retrial, the district court again held that the stipula- tion required the application of New York law to decide whether or not punitive damages were allowable. In doing so he correctly followed our opinion” (3a-4a). Upholding the District Court’s refusal to apply applicable foreign law on retrial was a misapplication of both Rule 44.1 and the law of the case doctrine. Rule 44.1 was designed to prohibit unfair surprise or prejudice to a party in raising of issues of foreign law. See Committee Note of 1966 to Rule 44.1. “Prejudice” in this context means inability to address the issues of foreign law. Fury had over four years to address the issues of Japanese law. It was not unfairly surprised at retrial by reference to Japanese law. Where an appellate Court “remands the case to the district court for further proceedings, new issues may be presented by amended pleadings not inconsistent with the judgment of the appel- late court, if the mandate of the appellate court does not preclude amendment.” 3 Moore’s Federal Practice J 15.11. Defendants may be dismissed after remand to preserve jurisdiction. Finn v. American Fire & Casualty Co., 207 F.2d 113 (Sth Cir. 1953). A new theory of recovery may be advanced after remand. See cases cited in 3 Moore’s Federal Practice J 15.11, notes 13 & 15. Fury was permitted to change its theory of the case and withdraw its claim for damages for 1970. The case was remanded for a new trial “on all issues” to give Fury a chance to correct the defects in its case which made the first verdict unsupportable. Neither Fury, the District Court nor the Court of Appeals advanced a rationale for following inapplicable law because a since corrected defect led to the application of the wrong law at the first trial. This Court should resolve the undecided issues of Federal law raised here. >. 18 (B) Proper Application of the “Law of the Case” Rule Would Not Permit Perpetration of Clear Error or Perpetuation of Manifest Injustice. Law of the case is a rule of practice. U.S. v. McClain, 593 F.2d 658. 664 (Sth Cir. 1979) cert. denied 444 US 918. It “is not an inexorable command. and must not be utilized to accomplish an obvious injustice.” Cochran v. M & M Trans- portation Co,, 110 F.2d S519, 521 (1st Cir. 1940) The decision of the Court of Appeals in this case represents a significant departure from previous lower court cases on “law of the case.” Only those issues decided expressly or by necessary imphi- cation become “law of the case.” Hartford Life Ins. Co. v. Blincoe, 225 U.S, 129, 136 (1921). The law of the case “does not include determination of all questions which were within the issues of the case and which, therefore. might have been decided.” Connett v. Ciny of Jerseyville, 110 F.2d OLS, 1O18 (7th Cir. 1940). A general remand does not preclude consid- eration of issues not squarely addressed on appeal. Doran v. Petroleum Management Corp., 576 F.2d 91 (Sth Cir. 1978). The Fifth Circuit acknowledged that its first opinion did not “expressly” rule on the choice of law questions involving punitive damages (3a). A decision on applicable state choice of law was not necessary to decision of the first appeal in light of the holdings that rejection of the notice of foreign law as untimely was proper and that the notice of foreign law was un agreement to apply local state law. Nevertheless. the Court of Appeals held that the law of the case required it to reject consideration of applicable state choice of law rules and foreign law. By extending the law of the case rule to preclude consideration of issues not previously deter- mined, the Fifth Circuit departed significantly from established practice. Its holding should be reviewed. An important question of federal law is presented since the law of the case rule is involved in every case remanded for trial by a Court of Appeals. 19 The finding that Shakespeare agreed to apply New York local law on punitive damages was clear error. The letter setting forth the stipulation (6la) said that Shakespeare was urging application of Japanese law to the punitive damages question. ‘“*{S]tipulations should receive a fair and liberal construc- tion, consistent with the apparent intention of the parties, the spirit of justice and the furtherance of fair trials upon the merits, rather than a narrow and technical one calcu- lated to defeat the purposes of their making. A stipulation should be construed in light of the pleadings, and its terms should not be so construed to extend beyond that which a fair construction justifies.” 73 Am.Jur.2d, Stipulations § 7. On the second appeal, even Fury conceded that previous interpretation of the stipulation had been wrong, saying: ‘‘Under the parties’ stipulation, the conflict law of New York would be applicable.” (88a) The continued misapplication of the parties stipulation resulted in a verdict against Shakespeare for $600,000 in punitive damages. The Alice-in-Wonderland interpretation of the stipulation and the Fifth Circuit’s refusal to depart from it worked a manifest injustice. “*[ Jjustice is better than consistency’... [A court] must be free to determine whether the first decision was in error, and if so, whether a different result should be reached ... Where, as here, a party to the action raises serious objections to the soundness of the first decision, the Court, in all but special circumstances should re-examine the first decision as a prerequisite to its implementation as the law of the case.” Wm. G. Roe & Co. v. Armour & Co., 414 F.2d 862, 867-68 (Sth Cir. 1969) (Citations omitted). See also Burkett v. Shell Oil Co., 487 F.2d 1308, 1313 0.1 (Sth Cir. 1973). Had there been no stipulation, the Court would have been obliged to apply Florida choice of law rules. Day & Zimmer- 20 man, Inc. v. Challoner, 423 U.S. 3 (1975). Florida looks to the place where the wrongful act occurred in determining appli- cable law. Beasley v. Fairchild Hiller Corp., 401 F.2d 593, 596 (5th Cir. 1968); Hopkins v. Lockheed Aircraft. Corp., 201 S$.2d 743, 752 (Fla. 1967) Since the interference complained of took place in Japan, where Ohmori manufactured and sold the reels, under Florida law, Japanese law would have governed the question of punitive damages. The lower courts considered New York law to be the law of the forum by stipulation of the parties. New York follows the rule of “most significant contacts.” Babcock v. Jackson, 240 N.Y.S.2d 743 (Ct. App. 1963). Under its choice of law rules, Japan would have been the jurisdiction with the most signifi- cant contact since the tortious conduct occurred there, the contract allegedly interfered with was entered into there, Oh- mori was a Japanese National operating only in Japan and the breach or other interference caused by Shakespeare could have occurred only in Japan. New York would have applied Japanese law on punitive damages. The lower courts evaded their obligation to apply state choice of law rules in a diversity case by obdurately refusing to reconsider their manifestly erroneous interpretation of a stipula- tion of law not binding on them. Consideration of the law properly applicable would have significantly changed the result. By refusing to reconsider its previous decision when serious objections were raised to its soundness, the Court departed significantly from accepted practice. IV. THE FAILURE OF THE COURT OF APPEALS TO APPLY APPLICABLE STATE LAW IN A DIVERSITY CASE AMOUNTED TO A REFUSAL TO FOLLOW THE DIRECTION OF DAY & ZIMMERMAN, INC. v. CHALLONER, 423 U.S. 3 (1975). (A) The Court of Appeals Failed to Conform Its Decision to Intervening, Controlling State Law. In its September 8, 1980, Opinion the Court of Appeals purported to apply New York law as the law applicable in this 21 diversity action.2 On May 2, 1980, Shakespeare called the attention of the Court to Guard-Life Corp. v. S. Parker Hardware Mfg. Corp., 428 N.Y.S.2d 628 (1980), the most recent pronouncement of New York’s highest Court on the law of tortious interference. (63a) Guard-Life unequivocally adopted the Restatement (sec- ond ) view of the tort of interference. 426 N.Y.S.2d of 634. It established that New York recognizes no distinction between “inducement to breach” and “‘inte:ference with a contract.” Note c to the Restatement (Second) of Torts, § 766 (entitled “Intentional Interference with Performance of Con- tract by Third Person”’) says, in part: “The liability for inducing breach of contract is now regarded as but one instance, rather than the exclusive limit of protection against improper interference in busi- ness relations.” Note k to the same section says, in part: ‘*... It is not necessary to show that the third party was induced to break the contract.” Prosser on Torts, 4th Edition, § 129, says: “Notwithstanding the name of ‘inducing breach of con- tract’ which has been conferred on the tort since Lumley v. Gye [118 Eng. Rep. 749, 1853], it does not require inducement to action as a means or complete repudiation as a result.” Inducing a complete breach is only one of many ways in which a contract can be interfered with. It is not the sine gua non of the tort. See Goodall v. Columbia Ventur:s, 374 F. Supp. 1324, 1332 (S.D.N.Y. 1974); Dior v. Milton, 155 N.Y.S.2d 443 2 Even if the Court were not obligated by Day & Zimmerman Inc. v. Challoner to apply New York law, its acceptance of a stipulation to apply New York law prevented it from frustrating the expectations of the parties by ignoring the stipulation and applying some other law. 73 Am Jr 2d, Stipulations § 7. 22 (Sup. Ct. 1956), aff'd 156 N.Y.S.2d 996 (1956): Morris v. Blume, 55 N.Y.S.2d 196, 199 (Sup. Ct. 1945); and Sacks v. Stewart, 427 N.Y.S.2d 20, 22 (App. Div. 1980). The Fifth Circuit’s September 8 decision made no mention of Guard-Life. The decision was based on a distinction between “inducement to breach” and “tortious interference.” The Court said that: “Until there was a breach of the Fury-Ohmori contract, Fury could not sue Shakespeare for inducing its breach.” And: ‘Inducing another to break a contract does not become a legal wrong upon which an action may be based until damages are suffered as a result, and that occurs only when the breach happens.” The Court noted Goodall vy. Columbia Ventures, Morris v. Blume, Dior v. Milton and Prosser on Torts but distinguished them all saying: “That, however, is not the claim made here. Fury did not seek damages because Shakespeare made performance of its contract more difficult. It sued because Shakespeare induced Ohmori to break that contract.” * * * “It is, therefore, not decisive that Fury may have known in August, 1970, that Shakespeare might be violating its exclusive distributorship, for that would not have given Fury a claim for inducing the breach of the contract to supply reels, the basis on which it sought damages.” The Fifth Circuit also said that the trial court’s “instructions as a whole ... adequately conveyed that the plaintiff was suing for inducement to breach, not for making performance more difficult” (8a). Even if the Court were right about the nature of Fury’s claim, its first decision rested on a distinction between “in- 23 ducement to breach” and “interference with contract” not drawn by New York courts. In denying the application for rehearing, the Court de- scribed Guard-Life as: ““A decision apparently reported after the Opinion in this case was prepared...” (9a). The Court acknowledged that the tort on which Fury sued and the tort which Shakespeare said was barred were the same no matter what name was applied. However, it did not reconsider its previous ruling which said damages to Fury in 1970 as a result of Shakespeare’s interference were irrelevant. The Court was obliged to consider and follow applicable state law even if it became applicable while the appeal was pending. Vandenbark v. Owens-Illinois Glass Co., 311 U.S. 538, 543 (1941). Having previously refused to consider whether interference in 1970 barred the claim because the interference did not cause a “‘breach,” the court was obliged to examine the case in light of unequivocal, recent and controlling authority holding that “breach” was not an element of the tort sued on. The Fifth Circuit’s failure to follow Guard-Life, supra, was contrary to Day & Zimmerman, Inc. v. Challoner, supra and Vandenmark v. Owens-Illinois Glass Co., supra. Certiorari should be granted to command adherence to this Court’s precedents. (B) The Court Refused to Follow Applicable Law Be- cause It Was Not Satisfied with the Result that Would Be Reached. In Day & Zimmerman, Inc. v. Challoner, 512 F.2d 77, 82 (Sth Cir. 1975) the Fifth Circuit openly refused to apply state choice of law rules in a diversity case because it was not happy with the result that would be achieved. This Court reversed preemptorily, saying: “A federal cour. in a diversity case is not free to engraft onto those state rules exceptions or modifications which 24 may commend themselves to the federal court, but which have not commended themselves to the State in which the federal court sits.”” Day & Zimmerman, Inc. v. Challoner 423 U.S. 3, 4 (1975). In this case, both the District and Circuit Courts expressed dissatisfaction with New York law before making holdings directly at odds with controlling state precedent. Although state law was not openly rejected as it was in Day & Zimmer- man, “the fragrance of the rose” is the same. Certiorari should be granted so that the Fifth Circuit can be told again to conform its decisions to Day & Zimmerman, supra, and Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487 (1941) by adhering to state law in diversity cases. The September 8 opinion held that “breach” of contract by the non-suing third party was an element of the tort sued on by Fury. Under New York law, the repudiation of an existing contract is a “breach” even if the failure to perform under the contract does not occur for some time after the repudiation. Long Island Ry. Co. v. Northville Industries Corp., 393 N.Y.S.2d 925, 930 (Ct. App. 1977); Hartzell v. Burdick, 398 N.Y.S.2d 649 (1977); Mignon v. Tuller Fabrics Corp., 148 N.Y.S.2d 605 (App. Div. 1956). Ohmori’s June 10, 1970, agreement with Shakespeare repudiated the contract with Fury. Ohmori agreed to stop dealing with Fury within a year. Although this repudiation was a “breach” under New York law, the Court of Appeals refused to hold that Fury’s suit for inducing a breach was barred by the statute of limitations. The Court did not discuss or distinguish New York cases holding anticipatory breaches of contract actionable. The Court instead criticized the doctrine of anticipatory breach saying: ““A party who could be tempted to breach one contract might change his mind and breach another.” and that “Ohmori breached its Fury contract for purposes of this action only when in response to Shakespeare’s instigation it 25 failed to deliver reels... Ohmori signing a contract with Shakespeare was not, per se, an anticipatory breach of the Ohmori-Fury contract” (5a-6a). That the Court of Appeals thought it strange that New York would permit suit against a party who has breached his contract but might yet “change his mind and breach another” is not a reason to ignore state law controlling under Day & Zimmerman Inc. v. Challoner, 423 U.S. 3 (1975). Certiorari should be granted. The Fifth Circuit should be told to apply the law that governs the case whether it finds it strange or not. Fury’s contract was an exclusive distributorship contract. Inducing a breach of the exclusivity provision by Ohmori was actionable. Fury’s witnesses testified that in 1970 Shakespeare inter- fered with its exclusive distributorship rights by marketing its reels, which could only be obtained from Ohmori ( 64a-66a ). Fury’s only customer told it in 1970 that no more reels would be purchased from Fury because of Shakespeare’s marketing of the supposedly exclusive reel at a tackle show. Fury was compelled to disadvantageously renegotiate its con- tract with its only customer because of Shakespeare’s acts. Fury was also compelled to renegotiate its contract with Ohmori. As a result of these renegotiations, Fury sold fewer reels and made less profit (66a). Hannigan v. Sears, Roebuck & Co., 410 F.2d 285 (7th Cir. 1969) a case described by the Fifth Circuit as “very similar” (37a) and by Fury as “on all fours,” (88a) held such inter- ference with contractual rights actionable. Sears Roebuck had applied economic pressure to coerce third parties into modifying their contractual arrangements. The Seventh Circuit said: “To us, there is no legally significant distinction between unabashed third party conduct which causes one party to outrightly repudiate and breach its contract with another vy 7% 26 and subtle third party conduct which achieves essentially the same result through the equally questionable means of coercing a contractual modification. Both approaches are equally tortious in nature and similarly interfere with the contractual relationship of others.” 410 F.2d at 291. New York law is to the same effect. See Goodall v. Columbia Ventures, Inc., 374 F. Supp. 1324, 1332 (S.D.N.Y. 1974); Bryce v. Wilde, 333 N.Y.S.2d 614, 616 (App. Div.) aff'd 340 N.Y.S.2d 185 (1972); Dior v. Milton, 155 N.Y.S.2d 443 (S.Ct. 1956) aff'd 156 N.Y.S.2d 996 (1956). Yet the Court of Appeals refused to consider evidence of interference with the exclusivity aspects of Fury’s contract as “breach” or damages. It refused to consider Shakespeare’s claims that the jury was not properly instructed as to what “damages” where actionable and as to the nature of the tort. If the jury was “adequately” instructed that Fury was suing for the inducement of a breach of contract, it was inadequately instructed on the true nature of the tort as defined in Guard-Life, supra. The Court refused to consider “that Fury may have known in August, 1970, that Shakespeare might be violating its exclusive distributorship” because “that would not have given Fury a claim for inducing a breach of the contract to supply reels, the basis on which it sought damages.” Neither lower court cited any authority ( because there is none) allowing Fury to avoid the statute of limitations by withdrawing its claim for damages in 1970 or by suing for only inducement of some breaches of the contract with Ohmori. Under New York law, Fury’s characterization of its claim was irrelevant. Sacks vy. Stewart, 427 N.Y.S.2d 20, 22 (App. Div. 1980). Mishkin v. Dormer, 395 N.Y.S.2d 452 (App. Div. 1977); Mack v. Clairol, Inc, 415 N.Y.S.2d 16 (App. Div. 1979). The Court’s studied refusal to apply controlling New York law was also a refusal to obey the command of Day & Zimmerman, Inc. v. Challoner, supra. 27 New York was, by stipulation, the law of the forum. The situation was the same as it would have been if Fury had moved for a change of venue to New York. Carson v. U-Haul Co., 434 F.2d 916 (6th Cir. 1970); Brown Machine Co. v. Merrow, 411 F. Supp. 1162 (Conn. 1976); Haire v. Miller, 447 F. Supp. 57, 62 (N.D. Miss. 1977). New York’s choice of law rules apply the law of the jurisdiction with the strongest interest in the particular issue to be decided. New York sees no anomoly in applying one jurisdiction’s law to one issue in a case and another jurisdic- tion’s law to a separate issue. Babcock v. Jackson, 240 N.Y.S.2d 743, 752 (Ct. App. 1963). After the first trial the District Court found this rule not to his liking, saying: “In order to apply Japanese law on the substantive issue of punitive damages, it would be necessary to hold the appropriate choice of law for the whole cause of action as Japanese. This was neither argued or supported by the defendant. The Court concludes that to recognize Japa- nese law on a single issue which is favorable to the proponent of that foreign law and not apply Japanese law to other substantive issues which may not be so favorable would be anomalous.” (43a) The Court of Appeals did not discuss any choice of law rules. After retrial, Judge Atkins again refused to apply Japanese law on punitive damages. This time he recognized that ‘New York conflicts of law principles provide for the use of the law of the jurisdiction with the strongest interest” (12a). However, he also said that: “[T]Jo recognize Japanese law on the single issue of punitive damages would be anomalous and unjust, consid- ering that other Japanese law might be less favorable to SHAKESPEARE” (12a). 28 Judge Atkins offered other reasons for refusing to apply New York law, including his interpretation of the parties stipulation to be an agreement to apply “New York law of the tort of inducement to breach ...” Judge Atkins also found, without citation of any authority, that under New York’s choice of law rules Japanese law would not govern punitive damages. The Court of Appeals refused to consider New York choice of law rules or whether they required application of Japanese law on punitive damages. It sanctioned the District Court’s refusal to apply applicable state law because it did not com- mend itself to the Court. Certiorari should be granted. The lower courts should be directed to apply state choice of law rules in diversity cases even if the result is “anamolous.” 29 CONCLUSION A writ of certiorari should issue to review the judgment and opinion of the United States Court of Appeals for the Fifth Circuit. Respectfully submitted, JOHN C. HOWARD HowarD & HowarD 407 Kalamazoo Building Kalamazoo, Michigan 49007 616-382-1483 Counsel of Record for Petitioner JAMES H. GEARY LiTTLE & GEARY 107 West Michigan-Suite 301 Kalamazoo, Michigan 49007 616-344-1575 APPENDIX la FURY IMPORTS, INC., Plaintiff-Appellee, v. SHAKESPEARE COMPANY, Defendant-Appellant. No. 78-2962. United States Court of Appeals, Fifth Circuit. Sept. 8, 1980. Before RUBIN and POLITZ, Circuit Judges, and POINT- ER*, District Judge. ALVIN B. RUBIN, Circuit Judge: This case comes before us for the second time. See Fury Imports, Inc. v. Shakespeare Co., 544 F.2d 1376 (Sth Cir. 1977). We need not again recite the facts there set forth at length, but we give a summary sufficient to clarify the issues now before us. William Ciaccia designed a fishing reel called the “Spin- master” and formed a corporation, Fury Imports, to market it. Fury contracted with a Japanese manufacturer, Omori, to produce the reels. Omori was to sell the reels to its trading agent, Shinei Company. Shinei would in turn sell reels to Fury, which would be the exclusive distributor in the Western Hemi- sphere. For the 1970 retail season, Fury was required to and did order 150,000 reels although a slightly smaller number was actually delivered. In June, 1980 Omori entered into a contract with Shakespeare, a competitor of Fury, agreeing to stop making Spinmaster reels for Fury within one year and to start * District Judge of the Northern District of Alabama sitting by designation. 2a making a similar reel for Shakespeare. The Shakespeare- Omori contract was not literally carried out, for Omori contin- ued to make and deliver Spinmaster reels to Fury in 1971 and 1972, albeit in decreasing numbers. In 1973, Omori informed Fury that it would stop making Spinmaster reels. Fury filed this suit against Shakespeare on January 15, 1974. The first appeal followed a jury trial, which resulted in a verdict for Fury. Shakespeare successfully moved for a judg- ment notwithstanding the verdict. We reversed the district court’s judgment but remanded for a new trial on all issues including the defense that the statute of limitations had run on Fury’s claim. With regard to that issue we said: If the district court were to decide that the New York statute of limitation should have been applied, it will, of course, have to decide when Fury’s cause of action accrued under New York law, and whether any reason exists for tolling the statute. Although the parties address much argument to us on these issues, we think it would be premature to pass on them at this point. This is especially so because there may well be issues of fact upon which a jury should pass as to just when the first breach occurred. ... We therefore do not rule on these issues. 554 F.2d at 1390. The present appeal from the second jury verdict, awarding both compensatory and punitive damages, involves primarily two questions: (1) whether New York law or Japanese law governs the question of punitive damages and (2) when the statute of limitations began to run (that is, did it begin to run in June 1970, when the Omori-Shakespeare contract was made, or at a later time)? 3a I. Punitive Damages. [1] Prior to the first trial, the parties entered into a stipulation that New York law would generally apply. The parties disagree over whether that stipulation extended to the issue of punitive damages. We need not linger over the merits of this dispute since it has already been resolved. In our prior opinion we did not expressly decide which body of law controlled punitive dam- ages. However, we implicitly adopted New York law as determinative. We said: The district court, stating that under New York law punitive damages may be recovered “where the wrong complained of is morally culpable, or... actuated by evil and reprehensible motives or a desire to harm the plaintiff, or where an act is so reckless that its carelessness indicates a heedless disregard of the rights of others,” App. 60, nonetheless overturned the jury’s verdict. On the evidence in this case, we think this was error. 554 F.2d at 1388. We then proceeded to discuss the New York cases, and concluded that the district court “erred in setting aside the jury award as to punitive damages,” saying: Although we cannot be certain what the New York courts would do in a case like this, we do know that federal courts applying very similar law from other states have found the evidence sufficient to support awards of punitive damages in very similar inducement-to-breach cases. Hannigan v. Sears, Roebuck and Co., 410 F.2d 285, 293-94 (7th Cir. 1969) cert. denied, 396 U.S. 902, 90 S.Ct. 214, 24 L.Ed.2d 178 (1969); ABC-Paramount Records, Inc. v. Topps Record Distributing Co., 374 F.2d 455, 462-63 (Sth Cir. 1967). We think the same result should obtain under New York law here. 554 F.2d at 1389 (emphasis supplied ). 4a At the retrial, the district court again held that the stipula- tion required the application of New York law to decide whether or not punitive damages were allowable. In doing so he correctly followed our opinion. See Schwartz v. NMS Industries, Inc., 575 F.2d 553, 554 (Sth Cir. 1978). II. Statute of Limitations. [2] The parties agree that the New York statute of limitations controls. Under New York law, the period of limitations for tortious interference with a contract is three years. N.Y. Civ. Prac. § 214(4); Von Ludwig v. Schiano, 23 App.Div.2d 789, 258 N.Y.S.2d 661 (1965); see Rolnick v. Rolnick, 29 App.Div.2d 987, 290 N.Y.S.2d 111 (1968), aff'd, 24 N.Y.2d 805, 248 N.E.2d 442, 300 N.Y.S.2d 586 (1969); Hanrihan v. Parker, 19 Misc. 2d 467, 192 N.Y.S.2d 2 (1959). Whether or not it has run depends on when the cause of action accrued. The jury by special verdict found that “the first breach by Omori proximately caused by defendant Shakespeare Co.’s inducement” occurred after January 15, 1971, thus within three years of the date Fury filed this suit. There was sufficient evidence to support this finding. Shakespeare nevertheless invites us to accept the simplistic idea that, because the eventual breach of Omori’s contract with Fury arose “out of a meeting in Japan on June 10, 1970, between officials of Shakespeare’s wholly-owned overseas sub- sidiary...and... [the] president of the Omori company,” 554 F.2d at 1378, the cause of action accrued then as a matter of law. But neither life nor law is, fortunately, so simple. On that date, Fury could not have sued Omori for breach of contract for Omori had not yet failed in one iota of its contract obligations. Until there was a breach of the Fury-Omori contract, Fury could not sue Shakespeare for inducing its breach. As a recent opiruon of the New York Court of Appeals states: Sa In order for the plaintiff to have a cause of action for tortious interference of contract, it is axiomatic that there must be a breach of that contract by the other party ( Jsrae/ v. Wood Dolson Co. 1 N.Y.2d 116, 120, 151 N.Y.S.2d 1, 5, 134 N.E.2d 97, 99; Campbell v. Gates, 236 N.Y. 457, 141 N.E. 914; Lamb v. Cheney & Son, 227 N.Y. 418, 125 N.E. 817; 32 N.Y.Jur., Interference, § 20), a situation not here present. Jack L. Inselman & Co. v. FNB Financial Co., 41 N.Y.2d 1078, 1080, 364 N.E.2d 1119, 1120, 396 N.Y.S.2d 347, 349 (1977); accord, Torrey Delivery, Inc. v. Chautauqua Truck Sales and Service, Inc., 47 App.Div. 279, 366 N.Y.S.2d 506 (1975). Of course expressions can be found in New York opinions addressing another point, that “[t]he act of inducing the breach is the wrong ...” Conmar Products Corp. v. Universal Slide Fastener Co., 172 F.2d 150, 156 (2d Cir. 1949). But inducing another to break a contract does not become a legal wrong upon which an action may be based until damage is suffered as a result, and that occurs only when the breach happens. See Israel v. Wood Dolson Co., 1 N.Y.2d 116, 120, 134 N.E.2d 97, 99, 151 N.Y.S.2d 1, 5 (1956). Shakespeare cites as authority to the contrary Hagan Corp. v. Medical Society of New York, 198 Misc..207, 96 N.Y.S.2d 286 (Sup. Ct. 1950), aff'd 279 App.Div. 1058, 113 N.Y.S.2d 282 (App. Div. 1952), and Hanrihan v. Parker, 19 Misc. 2d 467, 192 N.Y.S.2d 2( Sup. Ct. 1959), but a closer reading reveals that in both of those cases there had been a breach of the contract prior to the date on which the court held the statute of limitations began to run. [3] A party who could be tempted to breach one contract might change his mind and breach another. Omori might have disregarded its June 10th compact with Shakespeare and continued to deliver Spinmaster reels to Fury for ten years. If sc. Fury would have had no cause of action against Shakes- peare (or, for that matter, Omori). Indeed, with Shakespeare’s 6a apparent consent (because it did not need all of Omori’s production ), something akin to that happened: Omori did not perform the Shakespeare contract according to its literal terms since it did not terminate all shipments to Fury on the scheduled date. Omori breached its Fury contract for purposes of this action only when in response to Shakespeare’s in- stigation it failed to deliver reels.’ For the same reason, Omori’s signing a contract with Shakespeare was not, per se, an anticipatory breach of the Omori-Fury contract. In some instances, New York permits a claim for inter- ference with contractual relations not constituting inducement to breach. Thus, a feder.u district court in New York recently said: It is not necessary, as plaintiff erroneously argues, to allege a breach of contract in order to state a valid claim for interference with contractual relations. The tort extends to cases in which performance of the contract is rendered more difficult or a party’s enjcyment of the contract’s benefits is lessened by the wrongdoer’s actions. In New York, “an unlawful interference with a person in the performance of his contract with a third ‘party is just as much a legal wrong as is an unlawful inducement of a breach of that contract by the third party.” : Goodali v. Columbia Ventures, Inc., 374 F. Supp. 1324, 1332 (S.D.N.Y. 1974) (quoting Morris v. Blume, 55 N.Y.S.2d 196, 199 (Sup. Ct.), aff'd, 269 App. Div. 832, 56 N.Y.S.2d 414 1. Omori did not deliver ali the reels that Fury ordered for 1970. There was, however, sufficient evidence that this failure was due to production problems, rather than to Shakespeare’s promptings, to allow the jury to find, as it did, that there was no breach induced by Shakespeare in 1970. As we said in our prior opinion, “Shake- speare can be held liable only for those breaches by Omori that it induced,” 554 F.2d at 1388 n.16, and the trial judge so instructed the jury. The limitations period did not begin to run until Shakespeare’s liability began. 7a (App. Div. 1945); see Dior v. Milton, 9 Misc. 2d 425, 155 N.Y.S.2d 443, 460 (Sup. Ct.), aff'd, 2 A.D.2d 878, 156 N.Y.S.2d 996 (App.Div. 1956); W. Prosser, Handbook of the Law of Torts 935 (4th ed. 1971). [4] That, however, is not the type of claim made here. Fury did not seek damages because Shakespeare made per- formance of its contract more difficult. It sued because Shakespeare induced Omori to break that contract. The amendment to Fury’s complaint adding the claim now relevant alleged that Shakespeare “‘purposely designed to interfere with the contractual rights of plaintiff and ultimately to put the plaintiff out of business,” and sought damages “for tortuous [sic] interference of the [sic] contractual rights.” Fury’s accom- panying memorandum of law supporting its amendment makes clear that it sought damages for inducing Omori to cancel the contract, not for making performance more difficult. The memorandum alleges that Shakespeare’s actions had the effect of “canceling out the plaintiffs contract with the Japanese factory that manufactured these Spinmaster reels.”’ It is, there- fore, not decisive that Fury may have known in August, 1970, that Shakespeare might be violating its exclusive dis- tributorship, for that would not have given Fury a claim for inducing a breach of the contract to supply reels, the basis on which it sought damages.? 2. The judge instructed the jury at one point: The breach of the contract, however, does not have to be a breach in the legal sense. Rather, the tort extends to situations in which the performance of the contract is rendered more difficult. Where a party’s enjoyment — of the contract’s benefit is lessened by the wrongdoer’s actions. Nevertheless, since another element in the plaintiffs case is dam- ages, the cause of action cannot accrue until the plaintiff has suffered damages for which he may be compensated. (Footnote continued on following page.) 8a [5] It was not reversible error for the trial court to exclude from the second trial as evidence bearing on when the claim arose the fact that Fury in the first trial claimed damages for 1970. Even if this legal theory of Fury’s counsel was evidence having a tendency to make it more probable or less probable that the claim indeed arose before January 15, 1971, and so relevant under rule 401 of the Federal Rules of Evidence, the trial judge was within his discretion in excluding it under rule 403, which allows the exclusion of relevant evidence if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury. See, e.g., United States v. Frick, 588 F.2d 531, 537 (Sth Cir. 1979); United States v. McDaniel, 574 F.2d 1224, 1227 (Sth Cir. 1978). Shakespeare briefly raises other points of error, but they are without merit. For these reasons, the judgment of the district court if AFFIRMED. (Footnote continued from preceding page.) His instructions as a whole, however, adequately convey that the plaintiff was suing for inducement to breach, not for making performance more difficult. In any case, even if this instruction is erroneous, it is erroneous in Shakespeare’s favor, since it could possibly have persuaded the jury to find that the statute of limitations began to run even before there was an actual breach. Since the jury found for Fury on the limitations point, any error was harmiess. 9a FURY IMPORTS, INC., a New York Corporation, Plaintiff-Appellee, v. SHAKESPEARE COMPANY, a Delaware Corporation, Defendant-Appellant. No. 78-2962. United States Court of Appeals, Fifth Circuit. Dec. 3, 1980. * * * * * Before RUBIN and POLITZ, Circuit Judges, and POINT- ER*, District Judge. ON PETITION FOR REHEARING PER CURIAM: The application for rehearing directs our attention to Guard-Life Corp. v. S. Parker Hardware Manufacturing Corp., 50 N.Y.2d 183, 428 N.Y.S.2d 628, 406 N.E.2d 445 (1980), a decision apparently reported after the opinion in this case was prepared, and urges that the Guard-Life opinion establishes a rule of New York law that would require a different analysis from the one made in our opinion. It is unnecessary to set forth all of the facts and issues in Guard-Life. The court there considered a claim for tortious interference with contract rights, but did not deal with the question of when the statute of limitations on such a claim commences. Although it implies, apparently contrary to in- * District Judge of Northern District of Alabama, sitting by designa- tion. 10a dications in some of the New York cases cited in our opinion, that New York does not recognize a cause of action for interference with contractual relations not constituting in- ducement to breach, as distinguished from a cause of action for inducing contractual breach, it does so under a rubric that apparently embraces both concepts by adopting this definition of the tort from the Restatement (Second) of Torts: intentionally interfering with’ a contract or a prospective contractual relation of another ... Restatement (Second) of Torts § 766 (1977). If we apply this concept to the present case, we come to the same result. The cause of action for “intentionally interfering with a contract” (sometimes called tortious inducement to breach of contract in the prior New York cases, decided before the Second Restatement was adopted in 1977) accrues only when damage is suffered. A change of name alters neither the fragrance of the rose nor the time when a cause of action accrues for a tort whose name alone has been changed. For these reasons, the application for rehearing is DE- NIED. lla UNITED STATES DISTRICT COURT Southern District of Florida Case No.—Civ-CA Filed August 11, 1978 Fury Imports, INC.. Plaintiff, VS. SHAKESPEARE COMPANY, Defendant. Defendant, SHAKESPEARE COMPANY, moves for a judgment notwithstanding the verdict on the ground that Plaintiffs (FURY IMPORTS, INC.) claim is barred by the statute of limitations. SHAKESPEARE also argues that the award of punitive damages is barred by the applicable law. Statute of Limitations: Both parties agree that the applicable statute of limitations is the three year limit provided by New York law, since Florida law “borrows” statutes of limitation in certain actions. See F.S.A. § 95.10. The parties, however, disagree as to when the cause of action arose. The tort of inducement to breach a contract arises under New York law when the breach and damage occurs. Jsrael v. Wood Dolson Co., Inc., 1 N.Y.2d 116, 134 N.E.2d 97, 157 N.Y.S.2d 1 (1956). The jury was instructed on the statute of limitations defense and asked in the special verdict form whether the first breach occurred before or after January 15, 1971, the date three years prior to the filing of the action. The court did consider the statute of limitations defense and sub- mitted the relevant factual issues to the jury. The jury determined that the breach giving rise to the cause of action occurred less than three years prior to the filing of this action, and the court feels that this factual determination is one about which reasonable persons could differ. The cause was therefore not barred by the applicable statute of limitations. 12a Punitive Damages: SHAKESPEARE argues that the law of Japan applies to bar the granting of punitive damages since the parties have agreed to use New York law, and New York conflicts of law principles provide for the use of the law of the jurisdiction with the strongest interest. This Court has previously stated that to recognize Japanese law on the single issue of punitive damages would be anoma- lous and unjust, considering that other Japanese law might be less favorable to SHAKESPEARE. The Court interprets the vague stipulation of the parties as an agreement to apply New York law of the tort of inducement to breach and damages, and punitive damages are proper under that law. Even if New York’s choice of law rules are applicable, that law would allow the granting of punitive damages. Under a balancing of the interests approach, Japan would have no interests to protect. Neither of the parties is a Japanese citizen and the parties have agreed that the cause of action arose, if at all, under New York law. No Japanese citizen will be forced to pay these punitive damages and therefore, Japan’s interest in protecting its citizens from punitive damage awards is not infringed or involved through application of New York law. This action is transitory and Japan has no interest in barring punitive damages. In contrast, New York has an interest in providing punitive damages since a New York citizen has been injured. The Defendant SHAKESPEARE’S motion for judgment N.O.V. is DENIED. SHAKESPEARE’S motion for oral argument concerning this motion is also DENIED. DONE AND ORDERED at Miami, Florida, this 10th day of August, 1978. /s/ C. CLYDE ATKINS Chief United States District Judge 13a FURY IMPORTS, INC., Plaintiff-Appellant Cross Appellee, v. SHAKESPEARE COMPANY, Defendant- Appellee Cross Appellant. No. 75-2421. United States Court of Appeals, Fifth Circuit. June 24, 1977. Rehearing Denied Aug. 22, 1977. Before COLEMAN, MORGAN and HILL, Circuit Judges. LEWIS R. MORGAN, Circuit Judge: In this diversity suit for tortious inducement to breach a contract, plaintiff Fury Imports, Inc. appeals from a judgment notwithstanding the verdict entered in favor of defendant Shakespeare Company setting aside a jury verdict of $2,946,872.35. Defendant cross-appeals. We reverse and remand for a new trial. I. FACTS AND PROCEEDINGS BELOW. Although many of the facts and inferences to be drawn from them are hotly disputed, the bare bones of this case are as follows. William Ciaccia designed a new fishing reel called the “Spinmaster” and, in 1969, he incorporated Fury Imports in New York to market it. On December 15, 1969 Fury entered a three-party contract with a Japanese manufacturing company, Omori, and its trading agent, Shinei Company. Under this contract, Omori was to produce the reels. Fury was to purchase the reels from Omori through Shinei, which was to act as Omori’s distributor. The contract provided that Fury would have exclusive distributorship rights for the reel in the Western Hemisphere, Omori in Japan, and Shinei in the rest of the world. l4a Under the contract, Fury and Shinei were to place orders for an aggregate of at least 150,000 reels during the first year of the contract.! The period for which the contract was to be in effect was set forth in the following paragraph: This agreement shall remain in effect for a period of one year from the date hereof and shall continue in effect from year to year thereafter, provided that Fury and/or Shinei shall place orders for at least 150,000 additional units of the products during the first year hereof or any renewal year, as the case may be, for delivery during the succeeding year. App. 1089. It is not disputed that Fury did, in fact, order 150,000 reels from Omori, through Shinei, during the first year of the contract. Something less than this number was actually delivered to Fury for the 1970 retail season. Fury was not the only company for which Omori manufac- tured fishing reels. Since 1963, it also had made reels for the Shakespeare Company, a large sporting goods company in- corporated in Delaware. Fury and Shakespeare were com- petitors in at least some American markets to sell fishing reels. 1. The contract states: Fury and, with respect to sales under Paragraph ‘THIRD’ hereof, Shinei shall place orders with Ohmori for such quantities as in the discretion of Fury and Shinei each may require from time to time. Fury and Shinei shall place orders for an aggregate of at least 140,000 of the products during the first year hereof. The purchase price, terms ©! payment terms of shipment and other terms of sale shall be mutually agreed upon by Ohmori and Fury, or by Ohmori and Shinei with respect to sales under Paragraph ‘THIRD’ hereof, as set forth in each separate confirmed purchase order or sales order. App. 1088-89. At about the same time Fury entered this contract with Omori, it entered a contract with Southern Tackle Dis- tributors, a Florida corporation, under which Southern agreed to buy 150,000 Spinmaster reels per year from Fury. lSa There was evidence that Omori experienced financial difficulty in 1969-70, although the cause of that difficulty was disputed. This case arises out of a meeting in Japan on June 10, 1970 between Officials of Shakespeare’s wholly-owned overseas sub- sidiary, Noris-Shakespeare, and Mr. Omori, president of the Omori company. At this meeting Shakespeare and the Omori’ company entered an agreement by which Shakespeare. bought one-sixth of the stock in Omori for about $25,000 and was given the right to place a Shakespeare representative on Omori’s board of directors. Shakespeare also made a $200,000 interest- free loan to the Omori company. The critical portion of this agreement, as far as Fury is concerned, was a provision that Omori would stop making Spinmaster reels for Fury within one year and would start making a similar reel for Shakespeare.2 In the years after 1969-70, Omori delivered fewer and fewer reels to Fury. Finally, in 1973, Omori informed Fury that it would no longer make any Spinmaster reels at all for it. On January 15, 1974 Fury filed this suit against Shake- speare, alleging that Shakespeare had tortiously induced Omori to breach its 1969 contract with Fury.? The theory of Fury’s 2. The agreement provided: Omori currently manufactures a family of reels for the Japanese export company Shinei under the brand ‘Diamond Spinmaster’. It was agreed upon that within a year from now Omori will stop further supplies to this outlet and give up the production of these reels. To fill a possible production gap, the U.S. Shakespeare company and Omori will start immediately to create, design and develop a most up-to-date series of fishing reels similar to the current Diamond Spinmaster to be distributed worldwide by NST. App. 1030-31. 3. The complaint as originally brought was against Shakespeare and Southern Tackle Distributors for an a¢counting on allegations that Shakespeare had bought Spinmaster reels directly from Omori and (Footnote continued on following page.) 7% — l6a case was that Shakespeare had bought into Omori and made it a sizeable interest-free loan on the condition that Omori would quit making Spinmaster reels for Fury, with the purpose of eliminating Fury as a competitor to Shakespeare in the market to sell fishing reels. Fury sought compensatory and punitive damages. Shakespeare’s trial defense had two main prongs. First, it claimed that in the years after 1970 there was no contract in existence between Fury and Omori, so that it could not have induced any breach. This claim, in turn, rested on the theory that the Omori-Fury contract had not been renewed for the years after 1970. Shakespeare’s second line of defense was that its purpose for buying into Omori, making it the loan, and requiring that Omori stop supplying reels to Fury, was to save Omori from bankruptcy and preserve it as a steady supplier of reels to Shakespeare. This line of defense was put under variations on the “privilege” or “justification” defense to an inducement-to-breach suit. The ease was tried to a jury under an unwritten stipulation by the parties that New York law would apply. The jury returned a special verdict, printed here in the margin.* After the (Footnote continued from preceding page.) sold them to Southern, in violation of Fury’s exclusive dis- tributorship rights under the Omori Fury contract. Fury amended the complaint to include the tortious inducement count after discovery unearthed the tems of the June 10, 1970 agreement between Omori and Shakespeare. Southern was dismissed as a defendant, a ruling that Fury does not appeal. Neither do we have before us any questions concerning the action for accounting against Shakespeare. 1. Did the defendant Shakespeare know that the contract among the plaintiff, Ohmori Corporation and Shinei Corporation dated December 15, 1969, was in full force and effect in June, 1970? Yes X No (Footnote continued on following page.) 17a verdict was returned, Shakespeare, which had moved for directed verdicts at the close of plaintiff's evidence and at the (Footnote continued from preceding page.) 2. Was the contract extended through the year 1971 by the placing of orders for that year with the Ohmori Corporation for at least 150,000 units of the spinning reel in question? Yes _X No 3. Was the contract extended for the year 1972 by the placing of orders for that year with the Ohmori Corporation for 150,000 units of the spinning reel in question? Yes X No 4. Was the contract extended for the year 1973 by the placing of orders for that year with the Ohmori Corproation for 150,000 units of the spinning reel in question? Yes _X le 5. Did the Ohmori Corporation exercise a lawful right by refusing to manufacture spinning reels for the plaintiff by reason of the failure of the plaintiff to comply with the terms of the contract? Yes No __X 6. Did the Ohmori Corporation breach its contract with the plainuff by wrongfully refusing to manufacture the spinning reels in question for the years in which the contract was in full force and effect? Yes _X No 7. If your answer to Finding 6 above is yes, was the breach by the Ohmori Corporation of the said contract proximately caused by the defendant, Shakespeare Company, inducing the Ohmori Cor- poration to refuse to manufacture the reels? Yes _X No 8. If your answer to Finding 7 above is yes, was the defendant, Shakespeare Company justified in inducing the breach of contract? Yes X No (Footnote continued on following page.) 18a close of all the evidence, moved for judgment notwithstanding the verdict on a number of grounds. The district court granted Shakespeare’s motion in a written order on the grounds (1) that the evidence did not establish the existence of a contract between Fury and Omori for the years 1971, 1972, or 1973; (2) that the jury’s finding of no justification was against the manifest weight of the evidence or was based on no evidence at all; (3) that compensatory damages had not been proven with sufficient precision; and (4) (Footnote continued from preceding page.) 9. If your answer to Findings numbered 1, 6, and 7, and any of 2, 3, and 4 is yes, and your answer to numbers 5 and 8 is no, state the amount of any compensatory damages sustained by the plaintiff in each of the following years: (a) 1970 $35,278.88 (b) 197] $42,376.67 (c) 1972 $206,818.92 (d) 1973 $423,523.20 (e) 1974 (thru September 25) $563,319.68 TOTAL: $1,271,317.35 10. If your answer to Findings numbered 1, 6, and 7, and any of 2, 3, and 4 is yes and your answer to number 5 and 8 is no, answer the following question. Was the defendant Shakespeare Company guilty of wanton, willful misconduct in effecting such breach? Yes _X No 11. If your answer to nuinber 10 above is yes, please insert the amount of punitive damages below. $1,675,555.00 SO SAY WE ALL. 19a that the evidence did not support an award of punitive dam- ages. The court rejected Shakespeare’s argument that the action was subject to the three-year New York statute of limitations, rather than the four-year Florida statute of limita- tions, and hence was barred. In addition to the grant of judgment notwithstanding the verdict, the court recited that, “Shakespeare’s motion for a new trial is granted in accordance with the result reached in [the portion of the order dealing with proof of compensatory damages ]—but this recital is, of course, for purpose of the record only.” Fury appeals, arguing that the district court’s grant of judgment notwithstanding the verdict constitutes an unwar- ranted invasion of the jury’s province as fact finders. Shake- spear opposes this contention and, in addition, cross-appeals. On its cross-appeal it argues that the district court erred in holding Fury’s action was not barred by the statute of limita- tions; that it erred in ordering that each party bear its own costs; and that, if we reverse the district court’s judgment notwith- standing the verdict, a new trial should be held on all issues. For the reasons that follow, we have decided that.the district court erred in granting judgment notwithstanding the verdict on the issues whether the Fury-Omori contract was in existence in the years 1971, 1972, and 1973, whether the justification defense was available, and whether punitive dam- ages were available. We also have decided that a new trial is required on the issue of compensatory damages. Because that issue is sO intimately intertwined with the issue of liability, however, justice requires that a new trial be held on all issues. Finally, because the record is not sufficient for us to decide the statute of limitations issue, we remand that issue to the district court for further consideration. II. ISSUES CONCERNING LIABILITY. As we have said, the district court granted judgment notwithstanding the verdict on the issues whether the Fury- Omori contract was in existence in the years 1971, 1972, and 20a 1973, and whether the justification or privilege defense was available. In reviewing these holdings, we must consider all ti.e evidence—not just that evidence which supports the non-mover’s case—-but in the light and with all reasonable inferences most favorable to the party opposed to the motion. Boeing Co. v. Shipman, 411 F.2d 365, 374 (Sth Cir. 1969) (en banc). We hold there was sufficient evidence to present a jury question on each of these issues. [1] A. Proof of Continued Existence of the Fury-Omori Contract. Under New York law, the elements of a cause of action for inducement to breach a contract are (1) the existence of a valid contract; (2) the defendant’s knowledge of that contract; (3) the defendant’s intentional procuring of the breach of that contract: and (4) damages. Jsrael v. Wood Dolson Co., 1 N.Y.2d 116, 120, 151 N.Y.S.2d 1, 134 N.E.2d 97 (1956).5 In this case, the court instructed the jury that the Fury- Omori contract was in existence for the period from December 15, 1969 to December 15, 1970. App. 1004. It gave to the jury the question whether the contract was in existence in 1971, 1972, and 1973. This question turned on whether Fury had renewed the contract for those years. The contract’s renewal clause, quoted in its entirely in Part I above, provides that the contract “shall continue in effect [for years after 1970], provided that Fury... shall place orders for at least 150,000 additional units of the product during [1970] or any renewal year, as the case may be...” The district court 5. Under New York law, “Malice, in the sense of intending actual harm because of spite or ill feelings is .. . not a requisite to the tort of inducing breach of contract.... Knowledge of the existence of the contract is enough and implies malice.”” American Cyanamid Co. v. Elizabeth Arden Sales Corp., 331 F. Supp. 597, 608 (S. D. N. Y. 1971), accord. e. g., A. S. Rampell, Inc. v. Hyster Co., 3 N. Y. 2d 369, 376, 165 N.Y.S.2d 475, 144 N.E.2d 371 (1957); Aljassim v. SS South Star, 323 F. Supp. 918, 924 n. 12 (S. D. N. Y. 1971) 2la instructed the jury, “that in order to find that a contract existed during each of the succeeding years subsequent to December 15, 1970, you must find that orders were ... placed with the Ohmori Corporation and accepted by such corporation in an amount not less than 150,000 units for each of the years in question.” App. 1005 (emphasis added). It also instructed that, “the word ‘accepted’ as used in this instruction means an agreement by Ohmori on the purchase-price, terms of payment, terms of shipment and other terms of sale in the purchase order.’’6 The evidence at trial showed that Fury customarily placed its orders with Omori through Shinei. Ciaccia, president of Fury, testified that some, but not all, of the orders were written. He said that he did place orders with Shinei for 150,000 reels in 1970, 1971, 1972, and 1973, e. g., App. 683-86, and he produced what he said were all the orders that had been in writing. Mr. Kobayashi, president of Shinei, also testified that Fury ordered 150,000 reels from Omori through Shinei each year, that not all Fury’s orders to Shinei were written, and that Shinei did not always pass these orders to Omori in written form. App. 906-07. In its special verdict, the jury specifically found that the contract had been extended in 1971, 1972, and 1973 by virtue of the fact that Fury had ordered at least 150,000 reels in each of those years. See note 4 supra.’ [2] The district court overturned the jury’s conclusion that the contract was in existence in the years 1971, 1972, and 1973 6. It will be noted that the renewal clause of the contract contains no explicit requirement that Omori “accept” Fury’s orders in the manner defined by the district court before the contract would be considered renewed. Fury has not argued to this court that the district court’s construction of the contract was wrong in this respect, however. See Baet for Appellant at 20. 7. It will be noted that the special verdict form, unlike the district court’s instructions, does not refer to a requirement that Omori “accept” Fury’s orders for the contract to be considered renewed. 22a on the grounds that there was no documentary evidence that Fury had ordered 150,000 reels from Omori in those years, and that there was no documentary evidence that Omori had accepted such orders, as the court had defined “accepted” in its instructions. The court stated that “the absence of such records is persuasive,” citing Fed. R.Ev. 803(7).8 We find defects in both grounds of the district court’s holding. First, the question whether Fury did order 150,000 reels in each year remained one of fact for the jury, not the court, to decide. As we have said, both Ciaccia and Kobayashi testified that the required number of reels was ordered each year and that the orders were not always in written form. Fury could not be required to produce writings that never existed. Cf. Fed.R.Ev. 1005. While the absence of written orders might be a factor for the jury to take into account in deciding whether Ciaccia and Kobayashi were telling the truth, it does not prove conclusively that they were not. Insofar as the district court based judgment notwithstanding the verdict on a lack of evidence that Fury ordered 150,000 reels each year, it erred. The second branch of the district court’s holding relied on a lack of proof that Omori had accepted the orders in question by agreeing on the terms of the orders. Because there was no proof that Omori had agreed on the terms of the orders, the court held, there was no proof that the underlying contract had been renewed. There seem to us to be two problems with this holding. 8. Rule 803(7) describes evidence admissible as an exception to the hearsay rule: Evidence that a matter is not included in the memoranda, reports, records, or data compilations, in any form, kept in accordance with the provisions of paragraph (6) [making ‘records of regu- larly conducted activity’ admissible despite the hearsay rule], to prove the nonoccurrence or nonexistence of the matter, if the matter was of a kind of which a memorandun, report, record, or data compilation was regularly made and preserved, unless the sources of information or other circumstances indicate lack of trustworthiness. 23a First, Omori did, in fact, manufacture some reels for Fury in 1971, 1972, and 1973. Hence, it is plain that Omori and Fury did agree on the terms of an order for some number of reels. As we have seen, there was evidence from which the jury could have found that Fury ordered 150,000 reels each year. We think the jury could infer, from the facts that Fury ordered 150,000 reels and that Omori shipped some portion of that number, that Omori and Fury had agreed on terms to cover the entire order. The fact that Omori did not actually ship the number ordered does not necessarily mean that it did not agree to the terms of such an order. Second, there was evidence in the record that the parties to the contract did not consider “acceptance” by Omori of Fury’s enitre order, as the court defined “acceptance,” to be a prerequisite to renewal of the contract. The court instructed the jury that it could take the parties’ own practices under the contract into account in determining the contract’s meaning and in determining whether the contract had been modified by implication.? Thus, the jury might have concluded from the parties’ conduct that the contract had been renewed for the years 1971, 1972, and 1973 by virtue of the fact that Fury had 9. ... I instruct you that words in a contract are to be construed according to their ordinary meaning where nothing appears to show that they were used in a different sense. However, words and phrases used in particular contracts are to be interpreted in accordance with the meaning ascribed to them by the parties. Also most importantly, the practical conduct or practices of the parties under a contract is a consideration of much importance in ascertaining the meaning of terms of a contract and that consideration is entitled to great, if not controlling, influence in ascertaining the parties’ understanding of the terms and language. This is so because the parties are in the best position to know what was intended by the language employed. Also, even if the terms of a contract are clear and unam- biguous, those terms may be subject to modification by implication from the acts of the parties. App. 1007. 7% 24a placed the required 150,000 order, even if it was not shown that Omori had “accepted” all the orders Fury placed. The evidence from which the jury might so have concluded consists of Omori’s own statements at the time it “‘cancelled” the contract. On June 8, 1973 Mr. Omori wrote Shinei as follows: Gentlemen: Concerning a contract signed between the notifying party and your company as well as American Fury on December 15, 1969 for the Diamond Spinmaster Fishing Reels, we had notified Mr. Akira Kobayashi, the president of your company and Mr. William Ciaccia, the president of the Fury Company on or about December 10, 1972 that we wished to cancel the above contract. We hereby confirm this notification of the cancellation of the contract in writing and as of this date. Under the above contract, it had been agreed that there would be a purchase of 150,000 units each year, but because we were not able to fu!fill such an agreement, it has become necessary to cancel the contract. App. 1165. Omori wrote Fury a similar letter the same day, although that letter attempted to cast blame on Fury for the termination of the contract. App. 1136. These letters carry an implication that Omori himself considered the contract to have been in effect up until he terminated it; for if the contract had not been in effect, there would have been no need to cancel it. In addition, it is undisputed that Omori did, in fact, produce reels for Fury in 1971, 1972, and 1973, although not in the quantity that Fury ordered. And finally, at no time during Mr. Omori’s testimony at trial did he intimate that he did not consider the contract not to have been renewed for those years. From all this, we think the jury could have inferred that, in the minds of the parties to the contract, the contract had been renewed each year. We therefore hold that the district court erred in granting judgment notwithstanding the verdict for 25a Shakespeare on the ground that, because it was not shown Omori “accepted” the full order placed by Fury in the years in question, the contract was not still in effect. [3] B. Justification or Privilege. We also think the district court erred in granting judgment notwithstanding the verdict on the issue of justification or privilege. In its fullest discussion of the subject to date, the New York Court of Appeals has recognized the general rule that, ‘“Procuring the breach of a contract in the exercise of equal or superior right is acting with just cause or excuse and is justifiable for what would otherwise be an actionable wrong.” Felsen v. Sol Cafe Manufacturing Corp., 24 N.Y.2d 682, 687, 301 N.Y.S.2d 610, 613, 249 N.E.2d 459, 461 (1969), quoting Knapp. v. Penfield, 143 Misc. 132, 134-35, 256 N.Y.S. 41 (Sup.Ct.1932). The cases finding privilege or justification, cited with approval in Felsen, include ones where the defendant and the plaintiff each had a contract with a third party, and the defendant induced the third party to breach its contract with the plaintiff, e. g., Knapp v. Penfield, supra; and cases where the defendant was a stockholder in a corporation, and the defendant induced the corporation to breach a contract with the plaintiff, e. g., Morrison v. Frank, 81 N.Y.S.2d 743 (Sup.Ct.1948). Felsen itself was the latter sort of case. In both kinds of cases, an inducement to breach is ‘privi- leged only if the defendant’s purpose is to protect his own contractual or equity interest, upon which the privilege is based. See, e.g., Felsen, supra, 24 N. Y. 2d at 687, 301 N. Y. S. 2d 610, 249 N. E. 2d 459; Knapp v. Penfield, supra, 143 Misc. at 135, 256 N. Y. S. 41; The Savage Is Loose Co. v. United Artists Theatre Circuit, Inc., 413 F. Supp. 555, 560 (S. D. N. Y. 1976); Restatement of Torts § 679(b) & Comment b (1939).10 10. § 769 of the Restatement states: One who has a financial interest in the business of another is privileged purposely to cause him not to enter into or continue a relation with a third person in that business if the actor (Footnote continued on following page.) 26a In this case, Shakespeare argues that it had two kinds of “existing economic interests” in Omori that justified its in- ducement to breach the Fury-Omori contract. First, it relies on its “permanent order” of reels from Omori, which predated Fury’s contract with Omori, as creating a “contractor’s privi- lege.”’ Second, it relies on its purchase of one-sixth of Omori’s stock and $200,000 interest free loan to Omori as creating an “‘owner’s privilege” or “‘investor’s privilege.” In order to protect these ‘“‘existing economic interests,” Shakespeare tells us, it was privileged to induce Omori to breach its contract with Fury. The district court, recognizing the principle “that one who has a financial interest in the business of another is privileged to interfere with a contract between that business and a third person provided that the purpo-. is to protect its own interest,” App. 55, accepted the argument. The difficulty with the argument, to our minds, is that the jury had evidence before it from which it properly could have found that Shakespeare’s purpose in inducing the breach was not to protect either its “permanent order” with, or its “own- ership interest” in, Omori. It may be, as Shakespeare has argued throughout, that its purpose in buying equity in Omori and loaning it money was to prop up a failing supplier. But it is considerably less clear that requiring Omori to terminate a contract that accounted for thirty percent of Omori’s total production would go far toward strengthening Omori’s finan- cial position. The jury could have found from the record a (Footnote continued from preceding page.) (a) does not employ improper means and (b) acts to protect his interest from being prejudiced by the relation. By its terms, the privilege stated in § 769 applies only to inter- ference with noncontractual business relations, and not to in- ducements to breach an existing contract. See § 769, Comment d. It appears, however, that the New York courts also have applied this privilege to inducements to breach existing contracts. See Morrison v. Frank, supra, 81 N.Y.S.2d at 744. 27a belief on Shakespeare’s part that Omori would fail, despite Shakespeare’s purchase of stock and loan, without the Fury contract—unless Shakespeare mustered enough additional or- ders to take up the slack that would be left by the ouster of Fury. The jury also could have found that Shakespeare experienced considerable difficulty producing enough addition- al orders to keep Omori afloat, and that this was the reason Omori did not terminate its contract with Fury altogether until 1973. From all this, the jury could have concluded that Shakespeare’s efforts to induce Omori to cut off supplies to Fury were in conflict with, and not in furtherance of, Shakespeare’s professed purpose of keeping Omori in business so it could continue to make reels for Shakespeare under Shakespeare’s “permanent order.” At the same time, it is far from clear that Shakespeare’s purpose in inducing the breach was to protect its ownership interest in Omori. The jury could have found, from the testimony of one of Shakespeare’s own employees, that Shakes- peare did not care whether Omori made any substantial profits. App. 168-69. The jury also could have found that Shakespeare wanted Omori to cut off Fury as soon as Shakespeare could place enough orders to keep Omori afloat, even if Omori could make more profit by also keeping the Fury business. From this, the jury could have concluded that Shakespeare’s purpose in inducing the breach was not to protect or enhance its equity interest in Omori, but rather was in conflict with such a purpose. The evidence from which the jury could have found that Shakespeare’s purpose in inducing the breach was not to protect either its source of supply or its equity interest in Omori is buttressed greatly by a series of memoranda circulated among Shakespeare executives. These memoranda would support a finding that Shakespeare’s purpose in inducing the breach was, in fact, to eliminate Fury as a competitor in the market to sell reels. For instance, on July 9, 1971, Bert Rost, rs 28a managing director of Shakespeare’s German subsidiary, wrote Ben Hardesty, vice-president for marketing of Shakespeare: The [Omori] factory is geared to make approx. 350,000 reels a year which is the minimum quantity for a moder- ately profitable operation. 500,000 could be made without any problems. As long as we cannot absorb the minimum quantity the factory has to produce to exist we have to look for business from our competitors even if we do not like it. I am really trying hard to eliminate any other customer from the Omori factory but I am afraid it might take another year * * * * * If you come to the conclusion that Mr. Omori should not make reels any more for somebody else please get in touch with Mr. Watanuki [the Shakespeare representative on Omori’s board of directors] by phone or telex. J have the feeling that there is still time to stop the order from Fury. By doing this we commit ourselves for feeding the Omori company with sufficient orders and permitting them to ship the production right away or give financial help. App. 1028 (emphasis added). On February 28, 1972 Rost wrote Hardesty: Let’s hope our sales will continue to be good and will finally reach a volume which enables us to absorb Omori’s full capacity to eliminate supplies to the one cther outlet left to Omori [i. e., Fury] ... J think both, Clyde [Rickard of Shakespeare’s marketing division] and Dick [?] would feel much better if we could cut off FURY from Omori. App. 1046-47 (emphasis added). On April 13, 1972 Rost wrote Hardesty; ...Mr. Omori was approached by Shinei ( Fury’s Japanese broker) to accept a fresh order for more than 100,000 reels ... Mr. Omori rejected but, if I understood correctly, left it open to accept the order if the reels can be produced and shipped from July and September as last year. During this period last year he had no orders from us and was more than happy to receive the Fury order at all. Jf we want to 29a get Fury out already this year, immediate action must be taken. I consider the risk very small even though I am afraid 180,000 reels for Europe is a lot but feel almost certain Clyde might be able to sell additionally in the States what we will miss out. Jsn’t there a good chance for Clyde to get the larger part of the Fury business if we cut them off smartly? App. 1054 (emphasis added). On April 17, 1972 Rickard wrote Hardesty: ... 1am in a position to commit the Shakespeare Market- ing Division for 185,000 Omori manufactured reels .... J cannot commit for this quantity if we continue to allow Omori to manufacture reels for Fury. Fury has, as you know, a look alike reel to our import and they have caused us a tremendous amount of problems in the market place due to their pricing. App. 1049 (emphasis added). And at about the same time, Rickard telexed to Rost: [1] can no longer live with [O]mori manufacturing reels for [Flury.... [S]o lets make the move and get [F]ury out. [1]¢ will save us a lot of heartaches in the states. App. 1056 (emphasis added). Finally, there was evidence that after Omori quit making Spinmaster reels for Fury, it made the identical reel for Shakespeare, App. 504, as the June 10, 1970 agreement between Shakespeare and Omori appears to have contemplated, see text and note at note 2 supra. We think this evidence, together with that reviewed above, would support a jury finding that Shakespeare’s sole purpose in inducing Omori to cut off Fury was to eliminate a competitor in the market to sell reels, and not to preserve Omori as a source of supply or as an investment. If that were the case, Shakespeare would have no valid claim of privilege. To be sure, Shakespeare argued below, as it has argued here, that it was necessary to cut off Fury in order to save Omori, because of what it says were lapses on Fury’s part in e% 30a dealing with Omori. But whether that was true also was for the jury to decide. We therefore hold that the district court erred in granting Shakespeare judgment notwithstanding the verdict on the issue of privilege. III. COMPENSATORY DAMAGES. To prove actual damages caused by the breach induced by Shakespeare, Fury introduced the testimony of its accountant. Fury sold five different models of reels produced by Omori. The accountant testified that he had taken a random sample of Fury’s purchase and sales invoices for each year in which damages were claimed. From this sample, he determined the average cost to Fury for each model of reel each year, and the average price that Fury sold each model for each year. By subtracting the former from the latter, he determined the difference each year between the average cost to Fury and the average price that Fury sold each model for. He then determined the average of the five models’ averages to arrive at the overall average difference, for all five models, between cost and sales price each year. This figure was meant to represent the average gross profit per reel to Fury each year, for the five models combined.'! The accountant testified that this method 11. The accountant used 1971 figures to give an example of his method. In that year, he said, the average cost to Fury for Model No. | was $3.34, No. 2, $3.60; No. 3, $4.10; No. 4, $4.52; and No. 5, $5.05. App. 803-04. In the same year he said, Fury’s average selling price for Model No. 1 was $5.08; No. 2, $5.52; No. 3, $5.99; No. 4, $6.06; and No. 5, $7.40. App. 804. The difference between the average cost and average selling price for each model, then, was foliows: No. 1 No. 2 No. 3 No. 4 No. 5 Selling price $5.08 $5.52 $5.99 $6.06 $7.40 Cost 3.34 3.60 4.10 4.52 5.05 Difference $1.74 $1.92 $1.80 $1.54 $2.35 The accountant then took a simple average of these five figures, which he said came to $1.97. By our calculation, it comes to about $1.89. The defendant, however, has not complained of the apparent discrepancy. 3la for determining the average gross profit represented standard accounting procedure. App. 795-96. The accountant was permitted to testify from his sum- maries, which had been made available to the defendant along with the records underlying them, as to what this average was for each of the five years in question. 12 He also was permitted to testify as to the difference between the number of reels actually received and sold by Fury each year, and the 150,000 that Fury supposedly had ordered from Omori each year.'3 The accoun- tant agreed that increased expenses that would accompany increased sales should be deducted from gross profits to arrive at net profits, but he assigned no figuies for how much expenses would have increased. In final argument to the jury, Fury’s counsel requested, as actual damages, an amount equal to the number of reels that Omori should have supplied, but did not, times the average gross profit per reel, for each of the five years in question. '4 The assumption, for which there was support in the evidence, was that Fury could have sold 150,000 reels each year if Omori had 12. The figures for each year were as follows, App. 801-07: 19701971 197219731974 $2.6 $1.97 $3.14 $2.91 $4.92 13. The figures for each year were, App. 802-08: 1970 = 1971 — «1972-1973 1974 35,874 77,136 131,244 113,844 150,000 14. Relying on the figures set out in notes 12 and 13 supra, he requested: 1970 1971 1972 35,874 77,136 131,244 xX §.26 x $1.97 x $3.14 $9,327.24 $151,957.92 $412,106.16 1973 1974 113,844 150,000 x $2.91 x $.92 $331,286.04 $738,000.00 Fs *% 32a shipped that many. Fury’s counsel told the jury that it should reduce these figures by whatever amount of expense it thought should be attributed to the lost sales, based on expense figures appearing in Fury’s profit-and-loss statements that were in evidence. He contended. though, that this amount would not be great. App. 989. The special verdict form given to the jury called for it to enter a separate figure for actual damages for each year in question. The figures requested by Fury, and those awarded by the jury, compare as follows: Requested Awarded RTOS ici nnkniatcttisccchiineadeon $ 9,327.24 $ 35,278.88 id Sees Th ccegdaduaeteices $ 151,957.92 $ 42,376.67 bE ORR SE ER arial $ 412.106.16 $ 206,818.92 PF sepiccinnnsteenainesiiherncbass $ 331,286.04 $ 432,523.20 Ee A Mtetedicnsctaveaeoieactes $ 738,000.00 $ 563,319.68 OR So iiotisinibsisxtatoniateaan $1,.642,677.36 $1,271,317.35 It will be noted that for the year 1970, the jury awarded about $26,000 more than Fury had requeste.*; and for 1973, it awarded about $101,000 more than Fury had requested. Its total award, however, was less than the total requested by Fury. As we read the district court’s opinion, it found three weaknesses in the proof and verdict on actual damages. First, it objected to the method the accountant used to arrive at the average gross profit per reel for each year, because that method did not take into account the number of reels of each model that were sold. That is, because the gross profit per reel varied from model to model, the court thought the average gross profit per reel for the five models combined should have been weighted to take into account how many reels of each model were sold. Second, the court thought the accountant’s testi- mony as to lost profits was deficient because it did not take into account increased operating expenses that would accompany increased sales, and that should be subtracted from lost gross 33a profits to arrive at lost net profits. And finally, the court thought the discrepancy for the years 1970 and 1973 between the amount Fury ha/4 requested and the amount the jury had awarded demonstrated that the jury had gone outside the evidence or had simply become confused. We agree, in general, with the second and third points made by the district court, and hold that a new trial is required. [4] A. The Accountant’s Method of Estimating Gross Lost Profits. We agree with Shakespeare that Fury was required to prove the amount of its damages with a reasonable degree of specificity. We disagree, however, that the accountant’s method of calculating lost gross profits was so lacking in probative value as to preclude an award based on his estimate. As Judge Ainsworth recently had occasion to explain, ““[ T]he issue is whether the probative value of the expert’s testimony was so slight that it should not have been submitted to the jury. [cite] A jury’s award of damages ... may have adequate support in the evidence even though an exp [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385007_1063%3A1. Public record. Not legal advice.