Petition for Writ of Certiorari — Jim Bouton Corp. v. Wm. Wrigley Jr. Co.
Supreme Court brief1990
Ask Donna
What actually matters in this document.
Text
FILED
AUG 2 «(88
JOSEPH SPANIOL, IR.
CTERK
|
\ ‘ Supreme Court, U.S,
{
}
t
}
No. }
Sa
IN THE ee
Supreme Court of the United States
OcToBER TERM, 1990
JIM BOUTON CORPORATION,
Petitioner.
— against —
WM. WRIGLEY JR. COMPANY and
AMUROL PRODUCTS COMPANY,
Respondents.
PETITION FOR A WRIT OF CERTIORARI TO
THE UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
STEVEN B. PokoTILow
Counsel of Record
BLUM KAPLAN
Attorneys for Petitioner
Jim Bouton Corporation
1120 Avenue of the Americas
New York, New York 10036
(212) 704-0400
Of Counsel:
ANITA K. YEUNG
July 31, 1990
QUESTIONS PRESENTED
i. Unless the Court of Appeals for
the Second Circuit explains the reasons why
the district court's findings of fact were
implausible, is not de povo review of the
record by the Second Circuit a reversible
error?
as Does not the decision of the
court of appeals conflict directly with the
pronouncements of this Court in Anderson v.
City of Bessemer City, N.C., 470 U.S. 564
(1985) ("Anderson v. Bessemer City") as to
the proper role of an appellate court in
applying Fed.R.Civ.P. 52(a) when it reached
its own factual conclusions as to the
intent of the parties to contract:
a. by placing its own inferences on
a document which was contradicted by
respondent's own testimony and which was
directly contrary to plausible factual
findings of the district court?
b. by totally disregarding the
ii
district court's express refusal to credit
respondent's testimony and reviewing only
the "undisputed objective facts" in the
record?
as Did the court of appeals err when
it made its own factual findings as to the
issues of partial performance and the
sufficiency of the mailgram as a “writing"
under New York statutory law?
iii
STATEMENT UNDER RULE 28.1
Pursuant to Rule 28.1 of this Court,
petitioner Jim Bouton Corporation states
that it has no parent companies,
subsidiaries or affiliates.
iv
TABLE OF CONTENTS
OPINIONS BELOW s «@ o & “a ele ene lele 2
JURISDICTION 6 «.é € 2 & « eo 8 6 © @ 2
STATUTORY PROVISION INVOLVED or ee ae 2
Samacneees Cr Tee Geeeeeee 8 8 @ @ 3
A. The Decision of the
Digerset Geemre «ss 6s * 4
B. The Decision of the
Court of Appeals .....- 8
Ge Statement of Facts .. . » on
REASONS FOR GRANT OF THE WRIT... . 19
CERTIORARI SHOULD BE GRANTED TO
ENFORCE ADHERENCE TO RULE 52 (a)
AND TO PROVIDE MINIMUM
GUIDELINES WHICH WOULD PREVENT
FLAGRANT DEPARTURES FROM THE
RULES OF DEFERENCE ARTICULATED
BY THIS COURT . «ec eee. - 19
A. The Meaileream. «. «+ « « 6 « . 22
B. The Silberman
LOCCOEF « « © 0 6 6 © & Je - 26
C. Section 15-301 of the
General Obligations Law of
Mew WORK .« «© cesees » an
II. THE DECISION OF THE COURT OF
APPEALS IS A REJECTION OF THE
GUIDING PRINCIPLES ENUNCIATED BY
THIS COURT IN RELATION TO THE
PROPER APPLICATION OF RULE
S2la)~e we ee eeee eee @
III. THE COURT OF APPEALS DECISION
HAS AN IMPORTANT AND FAR
REACHING IMPACT ON LITIGANTS
OVER CONTRACT DISPUTES AND THE
JUDICIAL SYSTEM. «. + + + «+ «+ *
A. If this Decision is Allowed
to Stand, A Proliferation
of Appeals Will Be Filed by
Dissatisfied
Litigants .. .-
B. If This Decision Is Allowed
To Stand The Manner In
Which Businessmen Do
Business Would Be
Impermissibly Dictated By
The Presumptions Of
The Courts. ..-=:+ >
CONCLUSION ..++e#e 8 *
APPENDIX
Opinion of the United States
Court of Appeals for the Second
Circuit, filed May 3, 1990. . .-
Findings of Fact and Conclusions
of Law of the United States
District Court for the Southern
District of New York, filed July
7, 2900. 3 6 6 4 8 OES
- 36
- 42
- 42
. 44
47
- ia
20a
vi
TABLE OF AUTHORITIES
ases Page(s)
City, N.c.,
470 U.S. 564 (1985). . . . . 3, 19, 20,
21, 22, 38
39, 41, 42
43
Bakhshandeh v. American
Cyanamid Co.
8 N.Y. 2d 981, 169 N.E. 2a 188,
204 N.Y¥.S. 2d 881 [Seeep) cceccese
Braen v. Pfeifer oi]
Transp. Co.,
wwe Wee S60 QNOG0)s 6a -6) 66 see
148 F. 2d 737 (2d Cir.),
aff'd, 326 U.s. ee Ss ee. ee 24
v. Koret, Inc.,
792 F.2d 34 (2d Cir. ee
363 U.S. 278 te 35, 38
DFI ¢ icati I
Greenberg
,
41 N.Y. 2d 602, 363 N.E.2a
312, 394 N.¥.S.2d 586 (1977). . . 33, 34
Corp.,
475 U.S. 809 (1986). ...... 7 « 22
vii
’
96 U.S. 557 (1878). -++***** * 30
781 F. 2a 264 (2d Cir.
1986) . . . . * . * * . . . . * . . . 22
W ;
475 U.S. 709 (1986). - +--+ + 20, 36
456 U.S. 844 (1982). -- +--+ + 29, 36
’
465 U.S. 1056 (1984). --- +++ + + 22
360 U.S. 310 (1959). --+++++-+ 41
474 U.S. 104 (1985). - - +++ ++ + 22
v P
434 U.S. 106 (1977). --++++++ 41
456 U.S. 273 (1982). ----+++-+- 20
751 F. 24 69 (2d Cir. 1984). - +++ 49
727 F.2d 257 (2d Cir. 1984),
, 469 U.S. 828
11984). 2 oe ww ee eo oe Se 10, 26
viii
3
x ’
374 N.Y.S. 2d 809,
50 A.D. 2d 651
(N.Y. App. Div. 1975)...
United States v. National Ass'n of
Real Estate Bds.
339 U.S. 485 (1950). ...
United States v. Oregon State
Medical Soc.,
343 U.S. 326 (1952)...
‘
353 U.S. 194 (1957)...
V'Soske v. Barwick,
404 F.2d 495 (2d Cir. 1968),
cert. denied, 394 U.S. 921 (1969).
,
845 F. 2d 374 (2d Cir.
1988), cert. denied, U.S. __,
3609 GS. GE. GAS (3008). « eo cee
Winston v. Mediafare
Entertainment Corp.,
777 F. 2a 78 (2d Cir. 1985).
Woodbury v. New
ority,
832 F. 2d 764 (2d Cir. 1987).
Zenith Radio Corp. v. Hazeltine
Research, Inc.
395 U.S. 100 (1969).
- 30
- 29
37
24
22
- 39
STATUTES
28 U.S.C. §1254(1).-
Fed.R.Civ.P.
N.Y.Gen.Oblig.L. § 15-301
(McKinney's 1978 &
West 1990). .
No.
IN THE
SUPREME COURT OF THE UNITED STATES
OCTOBER TERM, 1990
JIM BOUTON CORPORATION,
Petitioner,
-against-
WM. WRIGLEY JR. COMPANY and
AMUROL PRODUCTS COMPANY,
Respondent.
PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
Petitioner Jim Bouton Corporation
respectfully prays that a writ of
certiorari issue to review the judgment and
opinion of the United States Court of
Appeals for the Second Circuit entered in
this proceeding on May 3, 1990.
OPINIONS BELOW
The opinion of the United States Court
of Appeals for the Second Circuit is
reported at 902 F.2d 1074 and is set out at
pp. la-19a of the Appendix. The Findings
of Fact and Conclusions of Law of the
United District Court for the Southern
District of New York, which is- not
reported, is set out at pp. 20a-96a of the
Appendix.
JURISDICTION
The judgment of the court of appeals
was entered on May 3, 1990. Jurisdiction
of this Court is invoked under 28 U.S.C. §
1254(1).
STATUTORY PROVISION INVOLVED
Rule 52(a), Federal Rules of Civil
Procedure, provides in pertinent part:
In all actions tried upon the facts
without a jury or with an advisory
jury, the court shall find the facts
specially and state separately its
conclusions of law thereon, ;
Findings of fact, ... shall not be set
aside unless clearly erroneous, and
due regard shall be given to the
opportunity of the trial court to
judge of the credibility of the
witnesses.
Fed.R.Civ.P. 52(a).
STATEMENT OF THE CASE
This case calls upon the Court to
exercise its supervisory power by clearly
defining appellate obligations in the
review of factual findings subject to the
"clearly erroneous" standard. While this
Court has from time to time provided
guiding principles relating to the
application of Rule 52(a) in cases such as
Anderson v. Bessemer City, the courts of
appeals appear to find no _ impediment
reversing a lower court's factual findings
upon a pro forma recitation of the "clearly
erroneous" standard. In this case, the
Second Circuit has, without any recognition
of its obligation to defer to the
credibility and other plausible findings of
the trial court, simply made a de novo
substitution of its own factual conclusions
as to the intent of the parties.
A. The Decision of the District Court
Petitioner Jim Bouton Corporation
("JBC") filed this action in 1985 to
enforce an informal modification to a
license agreement. A bench trial in the
district court (Hon. Peter kK. Leisure)
commenced on January 25, 1988. The trial
lasted five days during which extensive
testimony was heard on relevant issues of
intent, motivation and the course of
dealing of the parties within a period of
eight years. The district court also had
the benefit of JBC's contemporaneous notes
and a substantial record of documentary
evidence which were often examined line-by-
line by the district court through the
testimony of the witnesses.
The district court issued its rulings
in a detailed Findings of Fact’ and
Conclusions of Law annotated to the trial
record. (20a-96a). The district court
found that, notwithstanding the parties'
contemplation of more formal papers to be
drawn up later by attorneys’, the parties
intended to be bound by an_ée informal
agreement, the negotiated terms of which
were set forth in a mailgran’®.
' The district court properly applied
the New York contract rules approved by the
court of appeals. (15a, 71la-72a). In the
Second Circuit, "the mere fact that the
parties contemplate memorializing their
agreement in a formal document does not
prevent their informal agreement’ from
taking effect prior to that event. ...
These rules, placing the emphasis. on
intention rather than form, are sensible
and reasonable." Reprosystem, B.V. v. SCM
Corp., 727 F.2d 257, 261 (2d Cir. 1984),
cert. denied, 469 U.S. 828 (1984) (quoting
V'Soske v. Barwick, 404 F.2d 495, 499 (2d
Cir. 1968), cert. denied, 394 U.S. 921
(1969)).
e Amurol first sent telexes but
because of transmission problems, also sent
a confirmatory mailgram. (48a). The
decisions below use the terms "telex" and
"mailgram" interchangeably.
Accordingly, the mailgram was found by the
district court to have modified an existing
license agreement between the parties
("1981 Agreement"). (80a-8la). In arriving
at this conclusion, the district court
applied a four-factor analysis articulated
by the Second Circuit. The following
factual findings were made by the district
court:
1. There was no explicit statement
by either party that it did not intend to
be bound until a written, signed agreement
was effectuated. (75a-76a).
2% The conduct of the parties, both
contemporaneously with the sending of the
mailgram and thereafter, indicate an intent
to be bound by the terms of the mailgranm.
(76a-77a).
3. While there were subsequent
discussions over one of the terms, the
differences between the parties emerged
later and such differences were not present
when the parties reached an agreement
modifying the license agreement. (77a-78a).
4. The course of dealings between
the parties supported the finding that
important documents were expected to be in
writing but not necessarily formally
executed by the parties. The informal
agreement memorialized in the mailgram was
"in keeping with their customary way of
doing business". (78a-80a).
Having concluded that a valid
modification was effected at the time the
mailgram was sent (the "1984 Agreement"),
the district court found the terms of the
modification to have been breached by
Amurol. Specifically, Amurol breached the
1984 Agreement by failing to pay to Bouton,
as agreed by the parties, an additional 2%
royalty after Amurol's reversion to the
1981 Agreement. Amurol also breached the
1984 Agreement by selling GARFIELD STRIPES,
KING KONG, GODZILLA and WEREWOLF shredded
gum in a pouch in violation of a covenant
not to compete set forth in the mailgran.
Accordingly, the district court ordered
Amurol to pay damages in the amount of
$998,940.34; to pay prejudgment interest on
all damages awarded; an accounting of
profits of the sale of gums in violation of
the covenant not to compete and an
injunction for the remainder of the license
agreement against the sale of shredded
bubble gum in a pouch products in violation
of the covenant not to compete. (JA:A 99-
100) .?
B. The Decision of the Court of Appeals
Careful review of the court of
appeals' decision will reveal that the
expression "definite and firm conviction"
> "JA: __"™ as used herein refers to
the Joint Appendix filed with the court of
appeals. The Joint Appendix was divided
into three volumes consisting of the
pleadings, signified by an "A__"; the trial
transcript, signified by a "T_" and
evidence of record, signified by an "E_".
is used by the appellate court as a
boilerplate expression to justify a
predetermined result. In its decision, the
court of appeals found no fault with the
district court's application of law to the
facts. Yet the court of appeals fails to
offer any explanation as to why its view of
the facts should be substituted for the
view of the district court or why the
district court's view is implausible.
In reversing the district court, the
court of appeals essentially focused on two
writings, the mailgram and a letter written
by JBC's counsel. (4a-8a). The court of
appeals also selectively and approvingly
analyzed the conduct of Amurol and its
attorneys after the sending of the
mailgram. The court of appeals then
concluded:
Our review of the record, much of
which is in the form of written
documents, leaves us with the definite
and firm conviction that the district
court erred in holding otherwise. See
10
» 427
Reprosystem, B.V. Vv. SCM Corp.
F.2d 257, 261 (2d Cir.), cert. denied,
469 U.S. 828 (1984).
(15a) (emphasis added).
The court of appeals did not reveal
how the detailed findings of the district
court were clearly erroneous. Nor did the
court of appeals address the four-factor
analysis and ultimate findings of the
district court.
The past history of the parties and
other evidence which placed the _ two
writings in context for the district court
and which formed the basis for the district
court's findings relating to the parties
course of dealing (see jnfra, B.7,
paragraph 3), were also inexplicably
ignored. The court of appeals simply
stated: |
Without reiterating the history of the
parties' negotiations, we conclude
that the undisputed objective facts
demonstrate beyond cavil that the
parties did not intend to be bound
until "final papers" or an “acceptable
writing" was prepared and signed.
tS
11
(17a). Then without any analysis of the
facts deemed pertinent by the district
court, the court of appeals cited a series
of cases which are inapposit~ to the facts
in this case. Also without any recognition
of its obligation to accept the district
court's factual findings, the court of
appeals independently developed its own
interpretation of Amurol's part performance
and concluded that Amurol's'§ immediate
payment of increased royalties was not only
referable to the 1984 Agreement but could
also be referable to an interim agreement
pending the execution of the formal
agreement. (18a). This view was rejected
by the district court, albeit implicitly
(77a, 55a-56a, 90a-93a), and was clearly
contradicted by both parties' testimony as
well as the objective evidence in the
record.
Finally, the court of appeals
concluded, also without regard to the
OEE
12
district court's findings, that the
mailgram was an insufficient "writing"
under the 1981 Agreement* and the New York
statutory requirement for such
modifications to be “in writing and signed
by the party against whom enforcement of
the change is sought." (15a).
c. Statement of Pacts
Since 1980 Petitioner Jim _ Bouton
Corporation ("JBC") has licensed to
Respondent Amurol Products Company
("“Amurol") the right to use the trademark
BIG LEAGUE CHEW in connection with a
shredded gum in a pouch product. In early
1984 an impasse occurred when JBC refused
to consent to Amurol running the same
* Paragraph 29 of the 1981 Agreement
requires modifications to be by "an
agreement in writing". The district court
noted that the 1981 Agreement does not
explicitly require the writing to be signed
by both parties in order to be valid. (74a-
75a). Thus, the district court found the
mailgram to be a sufficient writing for the
purposes of Paragraph 29.
13
commercial for the third consecutive year
(the "1984 Commercial"). (45a-47a). Since
Amurol had committed to the purchase of
media time for the 1984 Commercial, JBC's
refusal to consent required Amurol to put
the media package on hold temporarily.
(47a).
The principals for the two parties,
Jim Bouton ("Bouton") for JBC and A.G.
Atwater ("Atwater") for Amurol, felt a
great deal of pressure to resolve the
dispute quickly. On the one hand, Atwater
was frustrated by the hold up of the media
time for the 1984 Commercial. Bouton, on
the other hand, feared Atwater's threat of
trashing the BIG LEAGUE CHEW brand and
thereby depreciating the value of JBC's
trademark should the dispute’ remain
unresolved. (JA:T 178, 492-494; E 466-467).
After several weeks of debate, the parties
reached an agreement on February 22, 1984.
(78a). Bouton agreed to relinquish control
14
over all BIG LEAGUE CHEW advertising and
promotions in exchange for an additional
24% royalty and a covenant from Amurol not
to compete in the shredded gum in a pouch
market (the "No-compete").°> (47a-48a).
Atwater who admittedly "had a gun to
his head", drafted the terms of the
modification with Bouton over the
telephone. (52a, 48a). Atwater and Bouton
worked on the language together and when
the exact language was agreed upon by the
parties, a mailgram, signed by Atwater and
setting forth the terms, was sent to Bouton
and his attorney. (52a, 8la). After Bouton
compared the mailgram to his notes and
after he determined that the mailgram
tracked the language agreed to by the
parties over the telephone, Bouton gave
Amurol his verbal approval to run the 1984
> Amurol claims that the scope of the
No-compete is limited to shredded gum ina
pouch with a sports theme, not all shredded
gum in a pouch. (Appellant's Brief at 37).
15
Commercial which had been placed on hold.
(48a-5la). Bouton did not wait for his
attorney to review the mailgram before
giving his approval over the telephone.
Atwater testified that he and Bouton
had an understanding at that point. (49a).
In response to Atwater's request, Bouton's
approval was confirmed in writing by
Bouton's attorney in a letter ("Silberman
letter"). (53a).
Both the mailgram and the Silberman
letter contemplate more formal documents to
be drawn in due course. Neither party,
whether in writing or otherwise, ever
stated to the other that performance or
effectiveness of the modification was
conditional on the execution of a formal
agreement. (55a-56a) .°
¢ The district court expressly found
that the manner in which the parties
performed, relying on a writing but without
a formal agreement, was in keeping with
their customary way of modifying their
agreements in the past. (78a-80a).
16
Like Bouton, Atwater authorized
payment of the additional 24% royalties
without first consulting Amurol's counsel
and without waiting for the final papers.
(54a). Amurol also stopped seeking
Bouton's approval over promotions for the
BIG LEAGUE CHEW product. (56a). Bouton
believed that the modification was
effective immediately. Atwater's
testimony, found to be strained and
internally inconsistent by the district
court, was to the contrary. (49a-52a).
Nine months later and after the 1984
commercial had run its course, Amurol
advised JBC that the modification was not
effective. Accordingly, Amurol notified
JBC that it was "reverting" back to the
terms prior to the modification. Having
received the benefit of the modifications
and no longer faced with "a gun to his
head", Atwater now took the position that
no modification was effected since no
17
formal or final agreement memorializing the
terms of the modification had been signed
by the parties. (52a, 60a-6la).
Amurol's reason for the "reversion"
was that its parent, Wm. Wrigley Jr.
Company, could not live with the No-compete
as drafted in the mailgram. (JA: T 226, E
467). Shortly after Atwater had sent the
mailgram, Amurol's counsel reviewed the
terms of the modification and determined
that there was a possible anti-trust
problem. (57a).
In the following months, the parties
discussed alternatives which would achieve
the intent of a no-compete without
triggering anti-trust objections from third
parties. Wrigley's anti-trust attorney
proposed that Amurol pay JBC a 5% royalty
for competing gums as an alternative. (JA:
E 98). Bouton did not believe such an
alternative would be a sufficient
disincentive to Amurol launching a
18
competitive line of shredded gum in a pouch
product toward the close of the license.
(57a-60a). The trial court found that the
parties could not “reach an agreement on an
alternative to the no-compete language" and
thereafter, discussions terminated. (6la).
This case was commenced by Bouton shortly
thereafter.
19
REASONS FOR GRANT OF THE WRIT
I.
CERTIORARI SHOULD BE GRANTED TO
ENFORCE ADHERENCE TO RULE 52 (a)
AND TO PROVIDE MINIMUM
GUIDELINES WHICH WOULD PREVENT
FLAGRANT DEPARTURES FROM THE
RULES OF DEFERENCE ARTICULATED
BY THIS COURT
As this Court stated in Anderson v.
Bessemer City:
If the district court's account of the
evidence is plausible in light of the
record viewed in its entirety, the
court of appeals may not reverse it
even though convinced that had it been
sitting as the trier of fact, it would
have weighed the evidence differently.
Where there are two permissible views
of the evidence, the factfinder's
choice between them cannot be clearly
erroneous.
470 U.S. at 573-74.
The district court's decision was
overturned by the court of appeals without
any discussion of the district court's
subsidiary and ultimate findings and
without any explanation why the district
court's view is not plausible. The court
of appeals' decision in this case is an
20
object lesson in how an appellate court can
try a case de novo simply by a mechanistic
invocation of the standard of review.
Uniess this Court further defines an
appellate court's obligation to clearly
address the findings of fact deemed to be
clearly erroneous on appeal and why they
are not plausible, Rule 52(a) can easily be
rendered meaningless notwithstanding the
clear principles enunciated in Anderson v.
Bessemer City.
In cic ds nc Vv.
Worthington, 475 U.S. 709, 713 (1986), this
Court hinted that such a practice is
unacceptable. In reversing and vacating
the court of appeals' decision, this Court
noted, “nowhere in its opinion did the
court ever mention any of the factual
findings of the District Court, much less
discuss or analyze them." Similarly, in
Pullman-Standard v. Swint, 456 U.S. 273,
291-93 (1982), this Court recognized that
21
the extent of compliance with Rule 52 must
be ascertained by examining the actual
decision of a court of appeals, not by
reliance on a pro forma recitation of the
“clearly erroneous" standard.
In its appellee's brief, petitioner
JBC duly urged the court of appeals to heed
the precepts of this Court announced in
nders v. Bessem ity. Nonetheless,
the appellate court's decision ignores the
district court's credibility findings,
passes over course-of-dealing evidence
found significant by the district court,
and arrives at factual conclusions based on
inferences it impermissibly draws from the
documents that were carefully explained by
trial testimony. Implicit in the court of
appeals decision is the proposition that
little, if any, deference is due the
district court's findings when "much of the
evidence was in the form of written
documents". (15a). This total disregard of
22
Rule 52(a), especially in light of the 1985
Amendment thereto and this Court's clear
pronouncements in Anderson v. Bessemer
City, would warrant summary reversal. See
Lehman _v. out, 465 U.S. 1056 (1984);
Dennison Mfg. Co. v. Panduit Corp., 475
U.S. 809 (1986).
This type of barely disguised de novo
review is not an aberration in the Second
Circuit. See Hanson st PLC v. ML SCM
Acquisition, Inc., 781 F. 2d 264, 286 (2d
Cir. 1986), cert. denied, __—S@ U.S. ___, 109
S. ct. 818 (1989) (Kearse, Je,
dissenting) (The majority "pays little more
than lip service" to the principles
announced by this Court in Anderson v.
Bessemer City and Miller v. Fenton, 474
U.S. 104 (1985)); Williams v. Ward, 845 F.
2d 374, 396 (2d Cir. 1988) (Stewart, J.,
dissenting) (Since the record is replete
with references to the cooperation of other
actors in the arraignment system, the
OO
23
district court's findings may not be
summarily dismissed as unrealistic and
without factual basis); see also Woodbury
v. New York City Transit Authority, 832 F.
2d 764, 772 (2d Cir. 1987) (Feinberg, J.,
dissenting) (majority should have remanded
case for clarification of facts).
In this case, the court of appeals
dismissed substantial portions of the
record, limiting its analysis to
essentially two documents - the mailgram
setting forth the new terms agreed upon by
the parties and the Silberman letter
confirming Bouton's approval of the 1984
Commercial.’
A. The Mailgram
In addition to the terms agreed upon
by the parties, the mailgram stated, "Will
be in touch with Gilson [Amurol's attorney]
’ The court of appeals also focused
on what it deemed to be "subsequent
negotiations" after the sending of the
mailgran.
rere
24
to draw up final papers next week." (4a).
In concluding that these words do not
reflect an intent on the parties to
condition continued performance on the
execution of final papers drawn by the
attorneys, the district court heard
testimony regarding the meaning of this
language and made findings of fact
regarding the circumstances and motivation
surrounding the sending of the mailgran.
(46-63a).
The court of appeals, on the other
hand, simply cited Webster's Third New
International Dictionary and Black's Law
Dictionary (4th ed.) for the meaning of
| “final papers".® (5-6a). The court of
. This Court long ago inveighed
against the "tyranny of literalness".
United States v. Witkovich, 353 U.S. 194,
| 199 (1957). Learned Hand's admonishment
that "(it] is one of the surest indexes of
a mature and developed jurisprudence not to
make a fortress out of the dictionary," is
particularly apt here. Cabell] _v. Markham,
148 F. 2d 737, 739 (2d Cir.), aff'd, 326
U.S. 404 (1945).
_ —
25
appeals also opined that the parties, being
“experienced in the ways of business,
simply could not have intended that the
cursory mailgram message, which did not
even discuss a change in plaintiff's
substantial royalties, constituted a
legally enforceable modification of the
carefully prepared 1981 Agreement". (5a).
In reaching this conclusion, the court of
appeals never discussed the district
court's finding that the use of the
informal mailgram to memorialize the new
terms was “in keeping with their [Atwater's
and Bouton's] customary way of doing
business". The court of appeals also
ignored the district court's findings
relating to the reasons why the parties
needed the mailgram in the first place.
(4la-47a).
The court of appeals simply developed
its own interpretation of the evidence,
supplying its own inferences to the
————————————eEeEeEeEeEeEeEeEeEeEeEeEeEeEeEeEeEeEeEeEe
26
“undisputed objective facts". There is no
discussion whatsoever why it deems the
district court's view implausible. No
guidance is provided as to why the disputed
words in the mailgram should be given more
weight than the objective evidence which
placed the mailgram into the bargaining
context for the district court.’
B. The Silberman Letter
With regard to the second document
critical to the court of appeals' decision,
the "Silberman letter", the district court
found that the letter was written by
Bouton's attorney to confirm that he no
, The court of appeals blindly
followed Reprosystem, 727 F.2d 257, without
regard to the facts of this case. In
contrast to this case, the record in
Reprosystem, included relevant documents
explicitly stating that "when executed and
delivered, this Agreement ... will be valid
and binding”. 727 F.2d at 262. There was
also in the Reprosystem record a press
release with language expressly
conditioning contractual consummation on
the parties entering a definitive agreement
acceptable to the parties. 727 F.2d at 262.
27
longer objected to the commercial "based on
the understandings as to modification of
the Agreement which is to be reduced to
writing in due course." (53a). The
district court specifically found that the
Silberman letter "spelled out in further
detail" the modification set forth in the
mailgram. (53a). The Silberman letter also
stated, "If your understanding comports
with the above, we will operate on the
assumption that an acceptable writing will
come into being ... .™ (7a).
The court of appeals construed the
language in the Silberman letter to
evidence that no agreement was reached at
the time the mailgram was sent.’ (7a-8a).
‘© The court of appeals found it
Significant that the contents of the
Silberman letter did not meet with Amurol's
approval. (8a). The record belies this
assertion. The No-compete, which was not
mentioned in the letter, was Amurol's only
reason or excuse for not executing a final
agreement with JBC. The increase in
royalty and other terms detailed in the
Silberman letter were never deemed by the
28
Such an inference is directly contradicted
by the partial performance of the parties;
by Atwater's own testimony that he and
Bouton had reached an understanding at the
time of the mailgram; and by Atwater's
statement that the telex was sufficient
basis for him to produce the commercial
without further approval from JBC.
(51a)."'
The court of appeals also construed
the Silberman letter, which authorizes
Amurol "to run the T.V. ad for 1984",'* to
parties to be open issues requiring further
negotiation.
" Atwater's later testimony claiming
there was no agreement until the parties'
attorneys reviewed the terms and a final
agreement is signed by the parties was
expressly found to be not credible by the
district court. (50a-5la).
‘2 The error of the court of appeals'
finding of an interim one year agreement is
compounded since the possibility of an
interim agreement was never argued by
Amurol until the appeal and, in fact, was
contradicted by the counterclaim filed by
Amurol seeking repayment of the additional
24% it paid JBC in 1984 on the basis that
29
support its theory that the parties reached
an interim agreement, thereby explaining
the immediate payment of the increased
royalties by Amurol. (18a). The court of
appeals reasoned,
Because the payment of the royalty is
a ore eadil
referable to the short term permission
to run the specifically named
commercial, it cannot be treated as
part performance of an agreement
covering all commercials during the
succeeding four to nine years.
(18a) (emphasis added). It is blatantly
clear here that, the court of appeals
substituted its own less plausible view of
Amurol's partial performance."
no agreement was ever made. (JA: A 47).
3 As this Court re-emphasized in
Inwood Laboratories v. Ives Laboratories,
456 U.S. 844, 857 (1982) (quoting United
States _v. National Ass'n of Real Estate
Bds., 339 U.S. 485, 495 (1950)), an
appellate court cannot substitute its own
findings simply because the reviewing court
"might give the facts another construction,
resolve the ambiguities differently, and
find a more sinister cast to actions which
the District Court apparently deemed
innocent."
30
Not only did the court of appeals fail
to explain why the district court was
clearly erroneous on the issue of partial
performance”, but the court of appeals’
independent finding of an interim agreement
is clearly belied by the record. At trial,
Atwater testified that he never intended to
make an agreement, whether temporary or
final, by sending the mailgram to JBC.
THE COURT: ... that language of this
telex and also the mailgram, did you
intend that that should be in full
force and effect until an agreement
was drawn up satisfactory to the
parties? 2
THE WITNESS: No, your Honor.
THE COURT: What did you intend by
doing this?
THE WITNESS: It was an understanding
that I would not be bound by this
until I had a contract signed.
‘4 partial performance is an issue for
the trier of fact. v. Paris, 96
U.S. 557, 566 (1878); Christian Dior-New
York. Inc, v. Koret,. Inc., 792 F.2d 34, 40
(2d Cir. 1986); Snay v. Wood, 374 N.Y.S. 2d
809, 812, 50 A.D.2da 651, 651-52 (N.Y.
App.Div. 1975).
31
THE COURT: Did you tell Mr. Bouton
that you intended not to be bound by
this language when you discussed it
with him on the telephone?
THE WITNESS: No, I did not.
THE COURT: Why did you think you were
going through this exercise if it
wasn't something that was ...
THE WITNESS: It was something that I
wanted to do.
(JA: T595-6). The aforequoted colloquy
demonstrates that at trial the district
court had already tested out the appellate
court's interim agreement theory. However,
Atwater's testimony decisively negated any
possibility that the parties performed
pursuant to a short term agreement for the
year of 1984. In the face of this record,
it is the view of the court of appeals
below, not the district court's, that is
implausible.
Cc. j 5- fa) the General
Obligations Law of New York
The district court found that the
mailgram was a writing sufficient to
32
satisfy Section 15-301 of the General
Obligations Law of New York which provides
in pertinent part:
A written agreement or other written
instrument which contains a provision
to the effect that it cannot be
changed orally, cannot be changed by
an executory agreement unless such
executory agreement is in writing and
Signed by the party against whom
enforcement of the change is sought or
by his agent.
N.Y.Gen.Oblig.L. § 15-301 (McKinney's 1978
& West 1990). While the district court
does not detail why it believes’ the
mailgram is a “writing" sufficient to
satisfy Section 15-301, the support for the
district court's finding can fairly be
implied from the district court's detailed
Statement of Facts.
Specifically, the district court found
that the mailgram set forth all the terms
of the modification, either expressly or
impliedly, which were discussed by the
parties over the telephone. (8la, 48a).
The district court also described in detail
. ——— —_
33
how a telex was first sent by Atwater's
secretary but because of transmission
problems, a confirmatory mailgram was also
sent for safe-measure. Finally, the
district court noted how Bouton compared
the language in the mailgram with the notes
he had taken of the agreement reached with
Atwater over the telephone. (48a-49a).
Whether the mailgram is a "writing" is
a question of fact subject to the "clearly
erroneous" standard." In DFI
Communications, Inc. v. Greenberg, 41 N.Y.
2d 602, 363 N.E.2d 312, 394 N.Y.S.2d 586
(1977), the New York court of appeals
reversed the lower court's decision which
had held Board minutes of a corporation not
to constitute a "writing" satisfying
Section 15-301. The New York court of
appeals disagreed with the lower court,
as The court of appeals gave no
indication whether it regarded this issue
to be a question of fact or law.
__ OOOO
34
distinguishing the Board minutes in issue
from the unsigned memorandum rejected in
Bakhshandeh v. American Cyanamid Co., 8
N.Y. 2d 981, 169 N.E. 2d 188, 204 N.Y.S. 2d
881 (1960), a case relied upon by the lower
court.'© 41 N.Y. 2d at 606, 363 N.E.2d at
589-90, 294 N.Y.S. 2d at 315.
The New York court of appeals
explained that Section 15-301 was to
"assure the authenticity of an amendatory
agreement; thus, the statute requires a
dignity of a formal writing to insure the
validity and genuineness of a contractual
modification." DFI Communications, 41
N.¥.2da at 606, 363 H.E.2@ at 345, 394
N.Y.S. 2d at 589-90. Whether the mailgram
in this case measures up to the level of
dignity and authenticity of a writing which
would insure the validity and genuineness
16 Both the DFI Communications and
Bakhshandeh cases were cited by the Second
Circuit in support of its finding. |
33
of a contractual modification is just the
type of issue which should be determined by
the “application of the factfinding
tribunal's experience with the mainsprings
of human conduct to the totality of the
facts of each case". Commissioner v.
Duberstein, 363 U.S. 278, 289 (1960).
In Duberstein this Court determined
whether a particular transfer constitutes
a “gift" for the purposes of the Internal
Revenue Code is a factual inquiry. Whether
a mailgram constitutes a "writing" under
the circumstances of this case is a similar
inquiry of a non-technical nature which has
a close relationship to "the data of
practical human- experience, and the
multiplicity of relevant factual elements"
which must be determined by the trier of
fact. See Duberstein, 363 U.S. at 298.
If the court of appeals in this case
believed the district court had failed to
make findings of fact essential to a proper
LL
36
resolution of this issue, the court of
appeals should have remanded the case to
the district court for further findings.
See Icicle Seafoods, 475 U.S. at 714-15. If
the court of appeals believed the district
court erred, the court of appeals should
have explained the standard of review it
applied and why the district court was
Clearly erroneous. The court of appeals
failed to do either.
II.
THE DECISION OF THE COURT OF
APPEALS I8 A REJECTION OF THE
GUIDING PRINCIPLES ENUNCIATED BY
THIS COURT IN RELATION TO THE
PROPER APPLICATION OF RULE 52 (a)
The Second Circuit, in reversing the
district court's decision, has flouted
every principle governing the exercise of
the appellate review function.
Determining the weight and
credibility of the evidence is the special
province of the trier of fact. Inwood
37
Laboratories v. Ives Laboratories, 456 U.S.
at 856. The court of appeals gave no
weight to evidence going to the parties'
course of dealing and the bargaining
context which motivated the parties to set
forth the modification in an informal but
binding mailgranm. In contrast, such
evidence of past dealing and motive carried
great weight with the district court.'’ It
is also apparent, in view of the court of
appeals' silence on this issue, that no
weight was given to the district court's
credibility findings.
There is no case more appropriate
for adherence to a rule giving deference to
the trial court's factual findings than one
in which there is a vast record of
cumulative evidence as to long-past
transactions, motives and purposes, the
effect of which depends largely on
credibility of witnesses. United States v.
Orego tat edi , 343 U.S. 326,
332 (1952). In this case the district
court described in detail the previous
informal agreements under which the parties
operated, the strained relationship of the
parties over advertising and other
revealing evidence relevant to the issue of
intent. (28a-63a).
_
38
The Second Circuit has a history of
applying a de novo standard of review when
factual findings are based on documentary
evidence. Anderson v. Bessemer City, 470
U.S. at 574. This Court in Anderson v.
Bessemer City and the 1985 Amendment to
Rule 52(a) have clearly settled the issue
by declaring that inferences from
documentary evidence are as much the
prerogative of the finder of fact as
inferences as to the credibility of
witnesses. Yet, the court of appeals has
impermissibly fallen back on past
assumptions in this case by reviewing the
documentary evidence de novo.
There is also no question that Rule
52(a) requiring deferential treatment of
findings of facts applies equally to
factual inferences from “undisputed basic
facts". Duberstein, 363 U.S. at 291.
Yet the Second Circuit here has
selectively viewed the cold print of the
39
record to cull its own findings of fact,
findings purportedly based on “undisputed
objective facts", without any regard to
this Court's admonition that "appellate
courts must constantly have in mind that
their function is not to decide factual
issues de novo." Anderson v. Bessemer
City, 470 U.S. at 573 (quoting Zenith Radio
Corp. v. Hazeltine Research, Inc., 395 U.S.
100, 123 (1969)).
In applauding Amurol's attorneys who
advised Amurol to avoid possible anti-trust
problems, the court of appeals appears to
have been influenced by its belief that
reduction of competition is repugnant to
the public interest. (20a) In an exercise
of circular reasoning, the court of appeals
surmised, “it is logical to expect that
experienced businessmen and knowledgeable
lawyers will be concerned about entering
into a contract that might restrict
competition in that field." (20a). The
————————
40
court of appeals then goes on to approve
Amurol's conduct, concluding that Amurol
"used good sense in following its
attorneys' advice and that nothing in the
dealings between the parties hereto
prohibited them from doing so." (20a-21a).
The question in this case is not whether
Amurol's attorneys gave good advice but
when, if ever, did the parties intend their
modification to come into existence. If the
parties had a meeting of the mind at the
time the mailgram was sent as the district
court found, the concern of Amurol over a
purported anti-trust problem raised later
is irrelevant to the issue of intent in
this case.
Even assuming the motivations ascribed
by the court of appeals to Amurol and its
attorneys have some slender basis, it is
equally permissible to infer from the
evidence that the anti-trust issue is a
self-serving ploy on the part of Amurol to
a |
41
further modify terms which Atwater had
agreed to improvidently. It is equally
permissible to conclude that once Bouton
gave his approval to the commercial and
Atwater no longer had "a gun to his head",
he regretted sending the mailgram setting
forth his agreement to the covenant not to
compete. Where more than one view is
plausible, the court of appeals cannot
substitute its own account of the evidence.
Anderson v. Bessemer City, 470 U.S. at 574.
In light of the foregoing, the
decision of the court of appeals is so out
of line with normal and accepted practice
that review by this Court is warranted.
See Braen v. Pfeifer Oi] Trans. Co., 361
U.S. 129, 130 (1959); see also Marshall v.
United States, 360 U.S. 310, 313 (1959);
Pennsylvania v. Mimms, 434 U.S. 106 (1977).
42
Itl.
THE COURT OF APPEALS DECISION
HAS AN IMPORTANT AND FAR
REACHING IMPACT ON LITIGANTS
OVER CONTRACT DISPUTES AND THE
JUDICIAL 8YSTEM
A. If this Decision is Allowed to Stand,
A_ Proliferation of Appeals Will Be
Filed by Dissatisfied Litigants in
cases of this Nature
The appellate courts, in their sterile
environment sheltered from the realities of
the business world, cannot and should not
be allowed to impose their own assumptions
and theories of business relations by
retrying cases of this nature in de novo
reviews of the paper record. Litigants
must be allowed to have their disputes
resolved on a case by case basis,
especially is cases such as this’ when
sensitive factual issues of intent,
motivation and course of dealing should be
given great weight. As this Court
recognized in Anderson v. Bessemer City:
The trial judges's major role is the
determination of _§ fact, and with
43
experience in fulfilling that role
comes expertise. Duplication of the
trial judge's efforts in the court of
appeals would very likely contribute
only negligibly to the accuracy of
fact determination at a huge cost in
diversion of judicial resources. In
addition, the parties to a case on
appeal have already been forced to
concentrate their energies and
resources on persuading the trial
judge that their account of the facts
is a correct one; requiring them to
persuade three more judges at the
appellate level is requiring too much.
470 U.S. at 574-75.
To permit courts of appeals to share
more actively in the fact-finding function
would also undermine the legitimacy of the
district courts in the eyes of the public.
If the court of appeals' decision is
allowed to stand, litigants, at least those
with resources, will file appeals as a
matter of course in the expectation of
obtaining a retrial at the appellate level.
Inevitably, appeals will multiply in
contract cases of this type and judicial
resources will be needlessly wasted.
lee
44
B. If Thi isi wed To Stand
The Manner In Which Businessmen Do
Business Would Be Impermissibly
Dictated By The Presumptions Of The
Courts
Businessmen make binding’ informal
agreements every day in New York and all
over the United States. With the
proliferation of facsimile machines and
telexes in modern offices, businessmen also
conduct business by informal letters and
documents. The Second Circuit has, through
a series of decisions culminating in this
case", developed a strong ¥ judicial
presumption against informal agreements
when more formal agreements appear to be
contemplated. Unless this Court
‘8 During the Appeal, Amurol asserted,
"what has been consistent in the Second
Circuit is that this Court has determined
that the parties did not in fact intend to
be bound, despite contrary findings by
trial courts and juries." (Reply Brief at
6). While the Second Circuit cases relied
upon by Amurol can all be easily
distinguished, Amurol and others like
Amurol will be encouraged to reargue the
intent to contract issues on appeal.
45
intervenes, the Second Circuit can be
expected to make assumptions about the
"experienced businessman" oor "logical
businessman" grounded upon broad
preconceptions about business practices by
interpreting the businessmen's actions de
novo. See, e€.g., .G. u 2. VW. Horn
& Hardart Co., 751 F. 2d 69, 77 (2d Cir.
1984)("Certainly this is the kind of
agreement where it would be unusual to rely
on an oral understanding."); Winston v.
Mediafare Entertainment Corp., 777 F. 2d
78, 83 (2d Cir. 1985) (The Court noted that
$62,500 at issue was not a trifling amount
and where "the purpose of the agreement is
to forestall litigation, prudence strongly
suggests that their agreement be written
ee. i
The unfortunate businessman who still
believes in doing business on good faith
and, by informally documenting '-= such
agreements with familiar business partners,
46
must now hire attorneys to insure that the
appropriate language is drafted to legally
and clearly express the intent of the
parties.
When disputes arise, the unwary
businessman who does not do business with
his attorney at his side will be unable to
rely on the courts to discern the true
intent and motivation of his actions.
Businessmen will simply have to wait for
the attorneys to draft and redraft
agreements or proceed at their own risk.
The unscrupulous will be able to employ
ambiguous language in informal documents to
gain immediate benefits well knowing that
the Second Circuit will value form over
substance, elevating contract formalism
over the intent or good faith of the
parties. Unless a clear message
admonishing the Second Circuit from such
unacceptable exercises of their appellate
power is provided by this Court, the
——
47
judicial process, at least for some, will
create an intolerable burden.
CONCLUSION
If the Second Court decision is
allowed to stand, manifest injustice would
be imposed upon petitioner and an
impermissible departure from the accepted
course of judicial proceedings would be
condoned. The precedent of this case, if
permitted to stand, will encourage
litigants to seek de novo review from the
courts of appeals. Petitioner respectfully
prays that a writ of certiorari issue to
review the judgment and opinion of the
Second Circuit.
Respectfully submitted,
STEVEN B. POKOTILOW
Blum Kaplan
1120 Avenue of the Americas
New York, New York 10036
(212) 704-0400
Attorney for Petitioner
Of Counsel:
Anita K. Yeung
BLUM KAPLAN
aL
APPENDIX
la
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
oe
No. 560—August Term, 1989
(Argued January 10, 1990 Decided May 3, 1990)
Docket No. 89-7805
—
JIM BOUTON CORPORATION,
a New Jersey Corporation,
Plaintiff-A ppellee,
WM. WRIGLEY JR. COMPANY, a Delaware Corpora-
tion, and AMUROL PRODUCTS COMPANY, an Illi-
nois Corporation, and subsidiary of Wm. Wrigley
Jr. Company,
Defendants,
AMUROL PRODUCTS COMPANY,
Defendant-A ppellant.
Before:
VAN GRAAFEILAND, CARDAMONE and ALTIMARI,
Circuit Judges.
2a
Appeal from a judgment of the United States District
Court for the Southern District of New York which fol-
lowed a nonjury trial before Judge Leisure. The portion
of the judgment that awarded damages and granted
injunctive relief to appellee is reversed. The portion of
the judgment that dismissed appellant’s counterclaim
and the claims asserted in Counts II and III of appel-
lee’s amended complaint are affirmed.
>
STEVEN B. POKOTILOW, New York, New
York (Blum Kaplan, Anita K. Yeung,
New York, New York, of counsel), for
Plaintiff-Appellee.
JOHN G. KOELTL, New York, New York
(Jonathan H. Hines, Colby A. Smith,
Debevoise & Plimpton, New York, New
York, of counsel), for Defendant-
Appellant.
>
VAN GRAAFEILAND, Circuit Judge:
Amurol Products Company appeals from a judgment
of the United States District Court for the Southern Dis-
trict of New York which followed a nonjury trial before
Judge Leisure. The judgment awarded Jim Bouton Cor-
poration (JBC) substantial damages and gave it injunc-
tive relief in its action for breach of contract. It also
dismissed Amurol’s counterclaim seeking recovery
against JBC on a theory of unjust enrichment. We
————— °° &
3a
reverse those portions of the judgment that awarded
damages and granted injunctive relief to JBC. We
affirm the dismissal of Amurol’s counterclaim. We also
affirm the dismissal of the causes of action asserted in
Counts II and III of JBC’s amended complaint.
Jim Bouton, a former major league baseball player, is
president and 50 percent shareholder of JBC. The only
other shareholder is Rob Nelson, a former teammate of
Bouton. Amurol, a wholly-owned subsidiary of Wm.
Wrigley, Jr. Company, which was relieved of liability by
the district court, is engaged in the manufacture of
candy, gum, and other food products. Bouton and Nel-
son formed JBC in 1979 to capitalize on their idea of
marketing bubble gum that resembles chewing tobacco.
In 1979, Bouton filed a trademark application for ‘‘BIG
LEAGUE CHEW,”’ shredded bubble gum packaged in a
pouch. JBC’s agent contacted Amurol about marketing
the product. Amurol already had developed the concept
of shredded bubble gum, but expressed interest in using
the BIG LEAGUE CHEW trademark. The parties
entered into a series of licensing agreements which cul-
minated in a formal agreement signed in June 1982, but
effective as of July 1981 (the 1981 agreement).
Under the agreement, JBC was to receive royalties on
Amurol’s sale of BIG LEAGUE CHEW. The royalties
were calculated on a sliding scale, 2.5 percent for the
first $20 million in sales, 3.5 percent on the second $20
million, and 5 percent on sales over $40 million. JBC
retained the right to approve all advertising. Finally, the
document provided that it was the entire understanding
between the parties and could not be modified except in
writing.
4a
Bouton, as president of JBC, frequently objected to
proposed advertising. However, because Amurol some-
times did not consult Bouton until substantial time and
money had been invested in a particular advertising pro-
gram, on at least two occasions Bouton consented to
advertising he did not like, reserving the right to exercise
disapproval during the ensuing season. In 1984, a dis-
pute arose over a promotional campaign based on a
**Baseball Bonanza’’ giveaway game. Amurol organized
the campaign, announced its use to its brokers, and pur-
chased media time for commercials, but Bouton refused
to consent to the format. A.G. Atwater, an Amurol
executive, contacted Bouton by telephone on February
22, 1984, to try to obtain his consent. After some dis-
cussion, they orally agreed that JBC would relinquish
advertising approval rights in return for a flat 5 percent
royalty on all sales of BIG LEAGUE CHEW. Atwater
further agreed orally that Amurol would refrain from
marketing any other shredded bubble gum that would
compete with BIG LEAGUE CHEW, but that Amurol
could continue to sell two products, ‘‘BUCKAROO
CHEW’”’ and ‘‘POPEYE”’, which already were on the
market. Bouton then gave his approval to run the Base-
ball Bonanza advertising campaign.
Following this oral conversation, Atwater sent Bouton
a mailgram dated February 22, 1984, which read as fol-
lows:
This is the text we talked about. Will be in touch
with Gilson to draw up final papers next week.
If Amurol Products Company elects to continue
advertising, it will create and run advertising for
BIG LEAGUE CHEW with a masculine sports
theme featuring the brand in a quote macho
unquote image.
If promotional advertising is run, it will make every
attempt to feature the brand in the same image.
Any promotions to the consumer will continue to
feature prizes which are sports-oriented and in
keeping with the image of the brand.
Amurol, in consideration of Jim Bouton Corpora-
tion relinquishing all approval of advertising and
promotions, will, during the life of the contract,
refrain from introducing another quote shredded
unquote bubble gum which would compete with
BIG LEAGUE CHEW. POPEYE and BUCKA-
ROO CHEW, already on the market can continue
to be produced and sold.
JBC’s contention, as set forth in the Amended Pre
Trial Order, is that it entered into a ‘‘valid binding and
enforceable agreement’’ with Amurol on February 22,
1984, the terms and conditions of which were ‘‘set
forth, memorialized, and incorporated’’ in the February
22 mailgram. Although the district court’s opinion is
somewhat obscure on this point, a fair reading of it
indicates that the district court agreed. We disagree. .
The 1981 agreement, in which millions of dollars were
at stake, contains thirty-three paragraphs and takes up
seventeen pages of the printed appendix on appeal. The
parties, experienced in the ways of business, simply
could not have intended that the cursory mailgram mes-
sage, which did not even discuss a change in plaintiff's
substantial royalties, constituted a legally enforceable
modification of the carefully prepared 1981 contract.
The mailgram’s reference to the drawing up of ‘‘final
6a
papers’’ by Amurol’s lawyer evidences a clear intent to
the contrary. The word ‘‘final’’ has the commonly
understood lay meaning of ‘‘conclusive,’’ ‘‘decisive,’’ or
‘‘definitive.’’ Webster’s Third New International Dictio-
nary 851. In legal parlance, its meaning is substantially
the same. See People v. Gaggi, 104 A.D.2d 422, 424
(1984) (mem.); Standard Oil Co. v. United States, 10 F.
Supp. 550, 560 (Ct. Cl. 1935); Black’s Law Dictionary,
757 4th ed.
The conduct of the parties which followed the dis-
patch of the mailgram demonstrates that they recognized
the need for a conclusive, decisive and definitive docu-
ment prepared by, or under the supervision of, their
lawyers. At Bouton’s request, a copy of the mailgram
was sent directly to James Silberman, JBC’s lawyer, and
Silberman was JBC’s spokesman in most of the negotia-
tions that followed. Silberman promptly questioned the
absence of any provision in the mailgram for increased
royalties and also informed Atwater that JBC wanted to
retain the right to restrict the use of the package in con-
nection with the sale of other products and to approve
package graphics. Moreover, although in the final para-
graph of the mailgram JBC is said to have relinquished
all right to approve advertising and promotions ‘‘during
the life of the contract’’, Atwater believed it necessary
to obtain a letter from Silberman specifically approving
the Baseball Bonanza commercial. On February 28,
1984, Silberman sent Atwater a letter reading as follows:
You have requested written confirmation that
Amurol can use for 1984 the TV advertisement pre-
viously submitted to Jim Bouton based on the
understandings as to modification of the Agreement
which is to be reduced to writing in due course.
Part of the understanding is set forth in your
Mailgram of February 22, 1984. The understanding
is also based on the following conditions:
1. Relinquishment of approval of advertising and
Promotion covers all ‘‘Articles’’ (BIG LEAGUE
CHEW shredded bubble gum and BIG LEAGUE
PLUG candy).
2. On all sales of ‘‘Articles’’ for the period Janu-
ary 1, 1984 through the end of the Agreement, the
payment under paragraph 4 will be five percent
(5%) on Net Sales.
3. Relinquishment of approval of advertising and
Promotion shall not be construed as a relinquish-
ment of any other rights that JBC has under the
Agreement including:
(a) the right to prohibit use of the package (exte-
rior or within the pouch) to sell another product
without a separate agreement; and
(b) the right to approve package graphics.
If your understanding comports with the above,
we will operate on the assumption that an accept-
able writing will come into being and, on behalf of
The Jim Bouton Corporation, I hereby give Amurol
authorization to run the TV ad for 1984.
JBC’s contention, as set forth in the Amended Pre
Trial Order, is that the foregoing letter ‘“‘reiterated and
clarified” the terms of the mailgram and incorporated
“‘related conditions’’ that were ‘“implied’’ in the mail-
gram. This simply is not so. Silberman’s letter recog-
nized that only ‘“‘[pjart of the understanding’’ was
contained in the mailgram. In addition to the royalty
Sa
provisions, which were not referred to at all in the mail-
gram, Silberman’s letter proposed that JBC would retain
the right to restrict the use of the gum packages and
their graphics or appearance, two additional matters
concerning which the mailgram was completely silent.
Moreover, the authorization given for the Baseball
Bonanza commercial was only for the year 1984, not for
the ‘‘life of the contract,’’ thus indicating that JBC was
acting under the assumption that it had not relinquished
its right to reject other advertisements or this one in the
years following 1984. Lastly, and most importantly, an
‘facceptable writing’’ between the parties was not to
come into being unless the contents of the letter met
with Amurol’s approval. Significantly, the contents did
not meet with Amurol’s approval. See Willmott v. Giar-
raputo, § N.Y.2d 250, 253 (1959). As summarized
below, the parties negotiated for nine months in an
unsuccessful effort to arrive at an ‘‘acceptable writing.’’
When Amurol’s attorney, Jerome Gilson, reviewed
the mailgram and Silberman’s letter, he immediately
questioned the legality under the antitrust laws of
Amurol’s proposed covenant not to compete. On March
19, 1984, Gilson orally conveyed his misgivings to
Silberman, and Silberman promised to prepare a draft
letter incorporating the terms of the supplemental agree-
ment. On April 17, 1984, and again on May 18, 1984,
Gilson wrote to Silberman inquiring about the promised
draft. On June 8, 1984, Silberman sent Gilson the draft
of a proposed ‘‘Amendment to Agreement.’’
Although the ‘‘Whereas’’ clauses of a contract do not
determine its operative effect, they do furnish a back-
ground in relation to which the meaning and intent of
the operative provisions can be determined. The
—————
9a
**Whereas’’ clauses of Attorney Silberman’s draft are
illuminating. The first clause states that JBC and
Amurol are parties to the 1981 agreement (not a Febru-
ary 1984 agreement). The second states that the parties
“desire to amend’’ the 1981 agreement (not that they
already have amended it). Despite the objection that
Gilson already had voiced to the anticompetitive clause,
Silberman included a provision in his draft to the effect
that Amurol would not introduce and market in the
United States and Canada ‘‘a shredded bubble gum
which will compete with the BIG LEAGUE CHEW
Brand,’’ excepting from the anticompetitive clause only
the POPEYE and BUCKAROO CHEW brands that
Amurol already was marketing.
JBC’s desire to eliminate competition proved to be a
stumbling block throughout the entire nine months of
negotiation. On June 19, 1984, after Attorney Gilson
had had an opportunity to review Attorney Silberman’s
draft, he made several adverse comments about it in a
letter to Atwater. Referring to the anticompetitive clause
he said:
As I mentioned to you previously, that for anti-
trust reasons, I am uncomfortable with a no-
compete clause of this type. I tried to talk
Silberman out of it several months ago, but he
either forgot or is unwilling to concede. As I see it,
we have two choices: delete it or ask Gordon Lang
for an antitrust opinion. If he approves it, I have
no problem with it. Shall I give him a call? If it
stays in, the rest of the paragraph, which allows
shredded gum to be sold outside the U.S., looks
acceptable.
10a
Referring to the clause which pronibited Amurol trom
using the interior or exterior of the package or container
to sell other products without a separate agreement with
JBC, Gilson said:
This was mentioned in his letter of February 28,
1984, but not in your telex of February 22, 1984.
This is another form of no-compete clause which
sounds very risky, as though JBC owned a patent
on the pouch and the display container. Thus, until
probably 1993 you would have to pay tribute to
JBC if you wanted to sell another pouch product
(interior or exterior) or use the retail display con-
tainer for another novelty item. This seems very
harsh to me, although I do not see a serious anti-
trust problem. Should we discuss it?
With Atwater’s approval, Gilson then sought advice
from Attorney Gordon Lang, a specialist in the field of
antitrust. The letter read in pertinent part as follows:
You will recall we talked last week about the no-
compete clause being requested of Amurol in a
trademark license amendment. Since then I tracked
down Jim Silberman, attorney for Bouton, and
unsuccessfully attempted to persuade him to drop
this demand. He contended that it was an impor- |
tant point. Accordingly, the question is ripe for
your advice.
What do you think about its legality? A.G. wants
to wrap up the amendment promptly. Could you
get back to me in a few days?
lla
On August 14, 1984, Attorney Lang responded to
Gilson’s request in part as follows:
Particular caution should be exercised in the case
of Amurol since it is owned by Wrigley, the domi-
nant manufacturer of chewing gum in the United
States. The restriction on marketing other types of
shredded bubble gum could be made the object of
antitrust attack because it may foreclose marketing
Opportunities to other persons who might wish to
sell their ideas for the manufacture or marketing of
shredded bubble gum to Amurol or Wrigley,
thereby constituting a substantial restraint of trade
under §1 of the Sherman Act, 15 U.S.C. § 1
(1982). There are numerous cases in the ordinary
distribution context which hold that foreclosure of
even 15-25 percent of the total number of distribu-
tion outlets constitutes an illegal restraint of trade.
[citations omitted]. Wrigley’s share of the chewing
gum market is considerably higher than the 15-25
percent threshold, and its share of the shredded
bubble gum market is even higher yet. To the mis-
chievous antitrust treble damage plaintiff, this com-
bination of facts and circumstances presents an
opportunity for costly and time-consuming litiga-
tion against Amurol, Wrigley and JBC. For these
reasons, it is advised that the proposed restriction
be eliminated from the draft amendment to the
Agreement between JBC and Amurol.
Mr. Lang continued:
In the event that JBC wishes to share in the
profits derived from the sale of types of shredded
bubble gum other than BIG LEAGUE CHEW, this
could well be done by offering JBC a royalty from
12a
the sales of all kinds of shredded bubble gum mar-
keted by Amurol in return for JBC having provided
Amurol with valuable and constructive ideas, know-
how and advice related to the development, manu-
facture and marketing of shredded bubble gum.
This would constitute a form of compensation for
the original contribution that JBC made to the
shredded bubble gum product which Amurol devel-
oped with the close cooperation and assistance of
JBC. ;
On August 20, 1984, Gilson wrote to Silberman,
reminding him of the fact that in addition to the 1981
agreement with respect to the BIG LEAGUE CHEW
and BIG LEAGUE PLUG (candy) trademarks, there
was an entirely separate agreement covering the trade-
mark ‘‘BUCKAROO CHEW’”’ [dated November 11,
1980] due to expire on September 15, 1984. He sug-
gested that the two agreements be consolidated and
enclosed a proposed draft to that effect. With respect to
Silberman’s proposed anticompetitive clause he wrote:
We have consulted with Amurol’s outside anti-
trust counsel with respect to the following language
- contained in the agreement you drafted:
During the Term of this Agreement, the Com-
pany will not introduce and market in the Terri-
tory a shredded bubble gum which will compete
with the BIG LEAGUE CHEW Brand.
Our client is unable to agree to this provision as
drafted. As an alternative, AG has agreed that
Amurol will pay to Bouton 5% royalties on any
competitive shredded bubble gum product that
Amurol should sell, in payment for the services ren-
l3a
dered by Mr. Bouton in the initial stages of devel-
opment of the shredded bubble gum product. I
believe this provision will avoid the potential for an
antitrust challenge to the non-compete clause you
Originally drafted. Thus, we have included such a
provision in the proposed Amendment.
Please review this Amendment with Mr. Bouton
and let us have your comments as soon as possible.
In light of the expiration of the BUCKAROO
CHEW agreement on September 15, 1984, we
would certainly like to finalize this matter at the
earliest opportunity.
,
The amendment as proposed by Gilson read as fol-
lows:
Subject only to the provisions of paragraph 8 of the
BIG LEAGUE CHEW Agreement, JBC acknowl-
edges that the Company has the right to market
outside of the Territory without obligation to JBC
Articles which do not utilize trademarks, themes
and Property covered by the Agreements, and that
the Company is the owner of all right, title and
interest in and to the formula, know-how and trade
secrets embodied in or related to shredded bubble
gum. However, in recognition of and as payment
for JBC’s participation in and services rendered in
connection with the initial development of the
shredded bubble gum product, as to any new shred-
ded bubble gum products introduced and marketed
by the Company in the Territory, the Company
agrees to pay to JBC five percent (5%) on Net Sales
without regard to the volume of Net Sales in a cal-
endar year.
l4a
Silberman then countered with the proposal that if
Amurol marketed any other shredded bubble gum prod-
ucts, it would pay 5 percent royalties to JBC and that
any trademarks used by Amurol in connection with
these other shredded bubble gum products would be
owned by JBC upon termination of the agreement. On
this proverbial rock, the ship of compromise foundered.
In a letter to Silberman from Susan Neal, one of
Gilson’s partners, Mr. Atwater’s reaction to Silberman’s
proposal was summarized as follows:
Following our telephone conversation of October
1, 1984, I had an opportunity to discuss your most
recent proposals with Mr. Atwater. As I was unable
to reach you by phone, I am taking this opportu-
nity to advise you as to Mr. Atwater’s reaction.
Amurol is not opposed to entering into a separate
agreement which provides for payment of 5% of
net sales on future shredded bubble gum products.
However, Mr. Atwater indicated that Amurol
would ‘‘absolutely not’’ agree to Bouton’s owner-
ship of any trademarks used in connection with
such products upon termination of the agreement.
Aside from this one provision, however, I believe
the principals are in agreement and we should be
able to finalize this matter prior to the current
expiration date of November 1, 1984.
Please let me hear from you at your earliest con-
venience.
On November 26, 1984, recognizing that ‘‘Amurol
and Jim Bouton have been unable to reach an agree-
ment as to a modification of the 1981 BIG LEAGUE
—
l5a
CHEW agreement,’’ Gilson terminated further discus-
sions concerning a proposed modification.
We are satisfied that both sides negotiated in good
faith for a written amendment of the 1981 contract, and
we Can see no purpose or intent in those lengthy negoti-
ations if a binding amendment already had been agreed
upon. Our review of the record, much of which is in the
form of written documents, leaves us with the definite
and firm conviction that the district court erred in hold-
ing otherwise. See Reprosytem, B.V. v. SCM Corp., 727
F.2d 257, 261 (2d Cir.), cert. denied, 469 U.S. 828
(1984).
The 1981 agreement provided that its terms could not
be waived or modified ‘‘except by an agreement in writ-
ing.’’ Recognizing that the mailgram did not contain all
the necessary material terms, JBC contends that the
mailgram and Silberman’s letter of February 28, 1984
“‘together’’ constitute such an agreement. The fallacy in
this argument is that the February 28 letter was not an
agreement, but was instead a counterproposal that never
was agreed to. As the mailgram anticipated the prepara-
tion by Amurol’s attorney of ‘‘final papers’’, Silber-
man’s letter contemplated the future preparation of an
‘‘acceptable writing.’’ The above detailed recitation of
facts discloses that a writing acceptable to both parties
never was prepared. This being so, the 1981 contract’s
requirement of an ‘‘agreement in writing’? and New
York’s statutory requirement of an agreement ‘‘in writ-
ing and signed by the party against whom enforcement
of the change is sought’’ (General Obligations Law § 15-
301(1)) have not been met. See DFJ Communications,
Inc. v. Greenberg, 51 A.D.2d 403 (1976), modified, 41
N.Y.2d 602 (1977), (Court of Appeals agreed with
—————————
l6a
Appellate Division that a note or memorandum of an
agreement is insufficient to satisfy the requirements of
section 15-301, but held that corporate minutes contain-
ing the ‘‘complete amendatory agreement’’ and signed
by the secretary of the company against whom enforce-
ment of the change was sought met the statute’s require-
ments); Bakhshandeh v. American Cyanamid Co., 8
A.D.2d 35, 37 (1959), aff'd, 8 N.Y.2d 981 (1960)
(mem.); Elmsford Sheet Metal Workers, Inc. v. Shasta
Indus., Inc., 103 A.D.2d 764 (1984) (mem.).
Applying general principles of contract law, we arrive
at the same result, viz., that there was no binding con-
tract of amendment. As the Supreme Court observed in
United States v. Line Material Co., 333 U.S. 287 (1948),
**[pjublic policy has condemned monopolies for centu-
ries.’’ Jd. at 308. That feeling exists in large measure to
this day. ‘‘Since competition is generally held to benefit
the public, any reduction in competition must be consid-
ered against the public interest.’’ Dellwood Foods, Inc.
v. Kraftco Corp., 420 F. Supp. 424, 428 (S.D.N.Y.
1976). Where, as here, a corporation and its parent
company occupy a dominant position in a commercial
field, it is logical to expect that experienced businessmen
and knowledgeable lawyers will be concerned about
entering into a contract that might restrict competition
in that field. It is not at all surprising that Amurol’s
antitrust counsel recommended that Amurol refrain
from becoming a party to such a contract.
Troubled by cases such as Dictograph Products, Inc.
v. Federal Trade Commission, 217 F.2d 821 (2d Cir.
1954), cert. denied, 349 U.S. 940 (1955), counsel opined
that even if a ‘“‘mischievous antitrust treble damage
plaintiff’’ could not be assured of success, the combina-
l7a
tion of circumstances ‘‘presents an opportunity for
costly and time-consuming litigation ... .’’ Without
assuming to decide whether a suit by such a plaintiff
against the parties herein would be successful, we are
satisfied that Amurol’s attorneys used good legal judg-
ment in advising Amurol to avoid the probiem. We also
are satisfied that Amurol used good sense in following
its attorneys’ advice and that nothing in the dealings
between the parties hereto prohibited them from so
doing.
New York follows the generally accepted rule that
when parties negotiating a proposed contract express an
intent not to be bound until their negotiations have cul-
minated in the execution of a formal contract, they can-
not be held bound until that event has occurred. See
R.G. Group, Inc. v. Horn & Hardart Co., 751 F.2d 69,
74 (2d Cir. 1984); Scheck v. Francis, 26 N.Y.2d 466,
469-70 (1970); Brause v. Goldman, 10 A.D.2d 328, 332
(1960), aff’d sub nom. Brause v. Marshall, 9 N.Y.2d
620 (1961) (mem.).
Without reiterating the history of the parties’ negotia-
tions, we conclude that the undisputed objective facts
demonstrate beyond cavil that the parties did not intend
to be bound until ‘‘final papers’’ or an ‘‘acceptable
writing’’ was prepared and signed. See Feick v. Fleener,
653 F.2d 69, 74 (2d Cir. 1981) (*‘Events are moving very
rapidly and it will be to the family’s advantage if we can
formalize our understanding as soon as possible.’’);
Tebbutt v. Niagara Mohawk Power Corp., 124 A.D.2d
266, 268 (1986) (mem.) (‘‘Please advise whether the
foregoing terms are satisfactory to your clients and we
can proceed to prepare whatever contract documents
may be required.’’); Rosenzweig v. Salkind, § A.D.2d
Sa
58, 60 (1957), aff’d, 5 N.Y.2d 902 (1959) (mem.) (‘‘Will
you please go over same, and if it is satisfactory, advise
me, and I will have them executed, and arrange to meet
with you within the next day or two for the purpose of
concluding this matter.’’); ABC Trading Co. v. West-
inghouse Electric Supply Co., 382 F. Supp. 600, 602
(E.D.N.Y. 1974) (‘‘If your client finds this proposal
agreeable in principle, we can proceed to reduce it to a
written agreement ....’’). See also EDP Medical
Computer Systems, Inc. v. Sears, Roebuck & Co., 149
A.D.2d 563, 564-65 (mem.), appeal dismissed, 74
N.Y.2d 873 (1989); Gambee v. Argendorf, 10 Misc. 2d
598, 600, 602 (1958).
Shortly after Attorney Silberman sent his letter of
February 22, 1984, in which he gave Amurol authoriza-
tion to run the Baseball Bonanza advertisement ‘‘for
1984’’, he contacted Atwater and inquired, ‘‘Since we
sent you a letter and you are going ahead with the com-
mercial, would you pay an additional 2-1/2 percent?’’
Amurol complied with this request. JBC contends that
this was convincing evidence that the parties had agreed
upon all the material terms of an amended contract run-
ning to 1988 with an option for a five-year renewal
term. Because the payment of the increased royalty is
equally, if not more readily, referable to th short term
permission to run the specifically named commercial, it
cannot be treated as part performance of an agreement
covering all commercials during the succeeding four to
nine years. See Wilson v. La Van, 22 N.Y.2d 131, 134
35 (1968); Bakhshandeh v. American Cyanamid Co.,
supra, 8 A.D.2d at 38; Bright Radio Laboratories, Inc.
v. Coastal Commercial Corp., 4 A.D.2d 491, 494
(1957), aff’d, 4 N.Y.2d 1021 (1958) (mem.).
19a
By the same token, we agree with the district court
that Amurol was not entitled to the return of the addi-
tional 2 1/2 percent royalty when it terminated the nego-
tiations looking toward an amended contract. Since it
had the use of the Baseball Bonanza commercial, there
was no unjust enrichment here.
We hold also, for the reasons stated by the district
court, that JBC’s alternate claims in Counts II and III
of its amended complaint that Amurol breached the
unamended 1981 contract were properly dismissed.
Because we hold that JBC is not entitled to any recov-
ery, we do not reach the question whether the district
court used the proper measure of damages.
In sum, we reverse the portion of the district court's
judgment which holds that JBC and Amurol entered
into a binding contract modifying their 1981 agreement
and awards damages and grants an injunction based on
the district court’s modification holding; we affirm the
portion of the district court’s judgment that denies
Amurol recovery on its counterclaim, and we affirm the
portion that dismisses the claims asserted in Counts I]
and III of JBC’s amended complaint. No costs to either
party.
20a
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
seem ee meee eee em eee wm eo ee eee eee = X
JIM BOUTON CORPORATION, : FINDINGS OF
FACT AND
Plaintiff, : CONCLUSIONS
OF LAW
-against-
WM. WRIGLEY JR. COMPANY and : 85 CIV. 2308
AMUROL PRODUCTS COMPANY, (PKL)
Defendants.
eee eee eee eee eee eee eee eee oe oe x
APPEARANCES
BLUM KAPLAN
1120 Avenue of the Americas
New York, New York 10036
Steven B. Pokotilow, Esq., of counsel
Anita K. Yeung, Esq., of counsel
ATTORNEYS FOR PLAINTIFF
DEBEVOISE & PLIMPTON
875 Third Avenue
New York, New York 10022
John G. Koeltl, Esq., of counsel
Jonathan H. Hines, Esq., of counsel
Anita Bernstein, Esq., of counsel
ATTORNEYS FOR DEFENDANTS
2la
LEISURE, District Judge:
On January 25, 26, 27, 28 and 29,
1988, this case was tried to the Court
without a jury. The parties submitted
posttrial proposed findings of fact and
conclusions of law on March 3, 1988, and
thereafter submitted simultaneous any
papers. Plaintiff subsequently moved to
reopen the testimony to offer additional
evidence. For the reasons stated below,
the Court dismisses the action as to
defendant Wm. Wrigley Jr. Company, finds
for plaintiff on its first claim for
relief, for defendant Amurol on plaintiff's
second and third claims for relief, and for
plaintiff on defendant Amurol's
counterclaim. The Court also denies
plaintiff's motion to reopen the testimony
on the present record as set forth below.
The following constitutes the Court's
findings of fact and conclusions of law
pursuant to Rule 52(a) of the Federal Rules
22a
of Civil Procedure.
FINDINGS OF FACT
THE PARTIES
Plaintiff Jim Bouton Corporation
("JBC") is a corporation organized and
existing under the laws of the State of New
Jersey. The president of the corporation
is Jim Bouton ("Bouton"), a former major
league baseball player. The only other
shareholder in the corporation is Rob
Nelson ("Nelson"). The corporation was
formed in 1979, with Bouton as president
and Nelson as vice-president. Each then
owned and continues to own 50% of the
corporation.
Bouton is a well-known sports figure
_and entertainment personality. He played
professional baseball in the minor leagues
for three years, and then was a pitcher for
the New York Yankees beginning in 1962. He
was subsequently sold to the Seattle
Pilots, and then traded to the Houston
23a
Astros. In 1970, he retired from baseball.
Also in 1970, Bouton wrote the book Ball
Four, which was on the best-seller list for
seventeen weeks, and sold over 250,000
copies, and about three million copies in
paperback.
After his retirement from baseball, he
joined local network television station
WABC in New York as a sportscaster on the
6:00 and 11:00 o'clock evening news. In
1973, he joined WCBS in New York as a
television sportscaster, where he remained
until 1976. In 1976, Bouton also created,
wrote and acted in a situation comedy that
aired on the CBS network in the fall of
1976. The show ran five weeks before it
was canceled.
In 1977, Bouton began a comeback to
the major leagues. He played in the minor
leagues in Knoxville, Tennessee, Durango,
Mexico and Portland, Oregon. In 1978, he
played in the Atlanta Braves' organization
24a
in Savannah, Georgia. At the end of the
1978 season, he was called up to the
Atlanta Braves. His return to the major
leagues was short-lived. In 1979, after
retiring from professional baseball
permanently, Bouton formed JBC. Bouton is
also engaged in other endeavors, and in
1983 he formed a company called Big League
Cards, which makes personalized baseball
cards. Bouton also engages in after dinner
and motivational speech-making.
Wm. Wrigley Jr. Company ("Wrigley") is
a Delaware corporation having its principal
place of business in Chicago, Illinois.
Wrigley is a leading manufacturer and
distributor of chewing gum and related
goods.
Amurol Products Company ("Amurol") is
an Illinois corporation with its principal
place of business in Naperville, Illinois.
Amurol is a wholly-owned subsidiary of
Wrigley. Amurol is engaged in the
manufacture, sale and distribution of
candy, gum, dietetic food products and
novelty products.
DEVELOPMENT OF THE PRODUCT
In 1977, while playing for’ the
Portland, Oregon minor league baseball
team, Bouton and Nelson came up with the
concept that developed into the predict
which is the subject of this suit. One
day, while Bouton was in the bullpen with
Nelson, the team's pitching coach, they
observed that all the other players and
coaches on the team were chewing tobacco.
The players did not particularly like the
taste of chewing tobacco, and it made many
of them sick, particularly when used over
sustained periods of time, but many thought
that it contributed to their maintaining
"macho" images. It was then that Nelson
commented that it was unfortunate that
there was not something available that
looked like tobacco but was goodtasting,
26a
such as gum. Bouton and Nelson laughed at
the idea, and did not think any more about
it at that time.
Several months later, after the season
had ended, Bouton could not get the idea
out of his head. He contacted Nelson and
suggested that the concept might be a
commercial success, and that they should
try to produce and market the gum. Nelson
made some gum in his kitchen, colored and
flavored it with molasses, and cut it into
strips with a large knife. Nelson and
Bouton then contacted an advertising agency
in Portland, and, with the help of the
agency, developed a package design for the
pouch in which the gum would be sold.
Bouton and Nelson contacted an attorney in
Portland to advise them about selling the
product and filing for trademark
application.
In 1978, Bouton contacted U.8.
Licensing, a professional licensing
27a
organization, and Vincent Alati ("Alati"),
President of U.S. Licensing, to licensé the
concept of BIG LEAGUE CHEW shredded gum in
a pouch. On June 15, 1979, Bouton filed an
application for a trademark for BIG LEAGUE
CHEW. In the meantime, U.S. Licensing
contacted various gum manufacturers to see
if there was any interest in manufacturing
and marketing BIG LEAGUE CHEW. In November
of 1979, Bouton entered into a contract
with U.S. Licensing. Under that contract,
Bouton was obligated to pay U.S. Licensing
35% of all royalties earned by Bouton from
any license agreement for BIG LEAGUE CHEW.
In the middle of 1979, Alati contacted
Amurol to determine if it would be
interested in entering into a _ license
agreement. Alati conducted negotiations on
behalf of Bouton with Amurol's then vice-
president and current president and chief
executive officer, A.G. Atwater
("Atwater"). At the beginning of the
28a
negotiations, Amurol and Bouton exchanged
product disclosure forms and other written
documents.
Prior to being contacted by Alati,
Amurol had dealt with the Conwood
Corporation, a manufacturer of chewing
tobacco, about selling shredded gum in a
pouch. Accordingly, Amurol informed Alati
that although it did not wish to use
Bouton's concept of shredded gum because it
already had the idea, it did wish to use
the trademarked name BIG LEAGUE CHEW.
EARLY CONTRACTUAL RELATIONS
After further negotiations between the
parties, attorneys representing U.S.
Licensing prepared a licensing contract
covering the BIG LEAGUE CHEW mark. The
agreement ("The Original Agreement"),
Defendants' Trial Exhibit 020090’ was
. Hereinafter, Defendants' Trial
Exhibits will be abbreviated DTX , and
Plaintiff's Trial Exhibits PTX :
29a
executed on or about December 5, 1979. The
Original Agreement was for a term of three
years from initial market entry of the
product. Bouton was to receive a 2%
royalty on gross sales, as well as power to
approve art work, packaging and related
advertising material. The Original
Agreement also gave Amurol the right to
market another shredded gum product with a
Western theme rather than a baseball theme.
The Original Agreement further provided
that it set forth the entire understanding
of the parties and that it could not be
modified except in writing.
In the first half of 1980, Amurol
developed the packaging and graphics, with
Bouton's approval, and conducted market
testing. In the middle of 1980, Amurol
proceeded to introduce the product. BIG
LEAGUE CHEW was an immediate success and
became Amurol's best-selling product. In
its first six months on the market, without
30a
any advertising or promotion, sales of BIG
LEAGUE CHEW totaled $3.4 million.
In the meantime, however, problems
between the parties surfaced. Bouton's
application for a trademark for BIG LEAGUE
CHEW was rejected by the patent and
trademark office in May of 1980. It was
then arranged for Amurol's outside counsel,
Jerome Gilson, Esq. ("Gilson") of Willian
Olds Hofer Gilson & Lione Ltd. ("Willian
Olds"), to assist Bouton in assuring that
the trademark was properly registered.* In
part as a result of the difficulties with
the registration of the trademark, there
was concern at Amurol that trademark
litigation might ensue. Amurol therefore
wished to have more substantial indemni-
fication from Bouton in the event of
litigation. Amuro] also wanted to correct
the representation in the Original
: The registration ultimately
issued in October 1983.
3la
Agreement that Bouton had registered his
trademark when, in fact, he had only
applied for such registration.
For his part, Bouton was dissatisfied
with Amurol's handling of Bouton's own
concept for a Western shredded gum, under
the BUCKAROO CHEW name. It was then
discovered by Amurol that the Mars ‘Candy
Company had previously registered the
trademark BUCKAROO for candy, but was not
actively using the mark. As previously
stated, Amurol had already developed a
Western theme, and was therefore reluctant
to use Bouton's concept. Nevertheless,
Amurol purchased the BUCKAROO trademark
from the Mars Candy Company and assigned
the mark to Bouton. Because both parties
were dissatisfied with the state of
relations between them, but optimistic
about the potential of BIG LEAGUE CHEW,
they negotiated over certain revisions to
the Original Agreement.
These negotiations culminated in a new
agreement between the parties. The new
agreement was signed in November of 1980,
but was dated as of December 5, 1979. In
effect, then, the November 1980 agreement
superceded the Original Agreement and
became known as the 1979 agreement (the
"1979 Agreement") .°
The 1979 Agreement provided that
Bouton would receive a 24% royalty rate on
the sales of BIG LEAGUE CHEW. The 1979
Agreement also required that Amurol receive
prior written approval from Bouton for all
advertising and promotions. Paragraph 20
of the 1979 Agreement provided:
5 Bouton did not recall that there
was a signed Original Agreement in 1979
before what later came «~o be known as the
1981 Agreement. Bouton explained that at
the time of the Original Agreement, Alati
was handling the negotiations and
preparation of contracts for JBC, and the
Original Agreement was drafted by Franklin,
Weinrib and Rudell, attorneys for U.S.
Licensing. I find Bouton's explanation for
his failure of recollection to be entirely
credible.
33a
The Terms of this agreement
cannot be waived or modified
except by an agreement in
writing. There are no
representations, warranties or
covenants other than those set
forth in this agreement which
sets forth the entire
understanding between us.
PTX 12. In addition to the 1979 Agreement,
the parties executed a separate agreement
relating to BUCKAROO CHEW, providing for
royalty payments to Bouton for BUCKAROO
CHEW.
The sales of BIG LEAGUE CHEW proved to
be impressive; in 1981, sales of BIG LEAGUE
CHEW totaled $18 million. When it became
evident that the product would be a
commercial success, the parties began to
think about extending the term of the 1979
Agreement, which was originally set for a
term of three years. Negotiations between
Bouton, Alati, and JBC's counsel, James K.
Silberman, Esq. ("Silberman") of Blun,
Kaplan, Friedman, Silberman & Beran ("Blum
Kaplan"), on the one side and Amurol and
sta
its counsel on the other side resulted in
of a. ietter of intent. .(the
"letter of Intent") 1n August of 1981. Tne
(lL
Letter of Intent was prepared and executed
ct
ct
~~
ct
ct
rw
me to “avoid misunderstandings"
to the terms of revised agreement. DTX
Both parties wanted to be bound by the
new terms, and were not sure how long
would take to draw up a new agreement, S
they drew up the Letter of Intent. Boutor
11FOCC, TE ic «S33
The Letter of Intent provided for a!
ncrease in the royalty rate to be paid
Bouton and an extension of the license
term, among other things. Specifically,
1e Letter of Intent provided for a sliding
ale of royalty payments by which Bouton
would receive 2% on the first $20 million
in annual sales, 34% on the second $20
million 5%¢ on sales over $40 million, and
Bouton understood that he woul
receive the 5% royalty rate in either of
two ways. First, if Amurol did not adver-
tise, he would be entitled to 5%. Second,
if Bouton did not approve advertising, he
thought he was entitled under the contract
to receive 5%. Bouton acknowledged,
however, that the Letter of Intent nowhere
explicitly provided that he would receive
the full 5% under the second circumstance.
Bouton cross, Tr. at 382-83.
rj
rom August 1981, when the Letter of
Intent was signed, until June 1982, when
the 1981 Agreement was signed, the parties
operated under the terms of the Letter of
Intent. Paragraph ten of the Letter of
Intent provided that the royalty rate for
BUCKAROO CHEW would increase from 14% to
2+ and that all royalty payments for BIG
LEAGUE CHEW would be made on a monthly
basis. Upon signing the Letter of Intent
in 1981, Amurol increased the royalty rate
$Ha
on BUCKAROO CHEW to 2%4% and started paying
BIG LEAGUE CHEW royalties monthly instead
of quarterly.
In June of 1982, approximately ten
months after the signing of the Letter of
Intent, an agreement was signed by the
parties (the "1981 Agreement"). Between
the signing of the Letter of Intent and
execution of the 198] Agreement, the
parties continued to discuss whether
certain terms would be included in the
final agreement, but the 1981 Agreement as
executed embodied all the elements set
forth in the letter of intent. Bouton
direct, Tr. 114.
Bouton retained the right to approve all
advertising, and that he would have to give
prior written approval of advertising.
Bouton now claims that he understood he
could receive a 5% royalty payment in
b--
r
-)
either of the aforesaid two ways. Th
interpretation was based on the interact
Of paragraphs 4, 5 and 16(a) of the
Agreement. Paragraph 4 provided that
Amurol would pay JBC a royalty rate on a
Sliding scale of 2% on the first
million in sales, 34% on the next §
million, 5% on all sales over $40 million
and 5 during the option period. This was
the same sliding scale that was agreed t
in the Letter of Intent. Paragraph :!
—
provided that Amurol was not obligated tc
advertise, and to the extent that Amuro] :
“does not spend the following amounts
advertising, it shall remit the difference
between its actual expenditure and the |
first $20 million in sales 2%, on the
second $20 million in sales 1%. Paragraph
l16(a) provided that
all artwork, copy, packaging,
literary text, advertisements
and advertising materials,
including the quality and style
thereof, shall be subject to the
s5a
prior written approval of JBC;
provided, however, that such
materials shall be deemed
approved if JBC does not notify
the Company in writing to the
contrary within seven (7) days
after receipt.
PTX 66. Once again, as with the Letter of
Intent, there was no indication in the
contract that Bouton could refuse to
approve advertising for no reason, and
thereby gain a full 5% royalty, nor did
Bouton ever express to anyone at Amurol
that that was his view of the 1981
Agreement.’
Paragraph 29 of the 1981 Agreement
provides in its entirety:
The terms of this Agreement
cannot be waived or modified
: An earlier draft of the 1981
Agreement provided that "all artwork, copy,
packaging, literary text, advertisements
and advertising materials, including the
quality and style thereof, shall at all
stages of production be subject to prior
written approval of JBC, which approval
shall not be unreasonably withheld." PTX
54a, §917(a) (emphasis in original). This
language was not included in the 1981
Agreement as it was finally executed.
39a
except by an agreement in
writing. There are no
representations, warranties or
covenants other than those set
forth in this Agreement which
sets forth the entire
understanding between the
parties.
\
This paragraph does not explicitly requir
Ke
that any subsequent writing be formally
executed or signed by both sides It
requires only that any modification be in
writing.
The new agreement between the parties
also contemplated the introduction of a
candy product under the IG LEAGUE
bes
trademark, identified as BIG LEAGUE PLUG.
Atwater and Bouton agreed informally in a
telephone conversation that the time by
which Amurol had to introduce the BIG
LEAGUE PLUG would be extended. That
agreement was memorialized and confirmed in
a handwritten letter dated September 20,
1982, PTX 70, which Atwater marked "attach
to our contract." Both parties’ then
mn
ee ________________.,
|
|
|
40a
operated on the basis of the letter,
although it was never formally executed by
both parties aS an amendment to the
contract. The parties also agreed
informally to extend the BUCKAROO CHEW
trademark agreement, and confirmed that
understanding by a telex. Bouton direct,
Tr. 219-20; Neal direct, Tr. 780-81, 788,
790; PTX 122.
ADVERTISING AND PROMOTIONS
At the outset of the relationship,
Bouton wanted advertising to promote the
brand. Atwater, however, was reluctant to
advertise because Amurol was 160,000 cases
behind in deliveries, and could not keep up
with the orders coming in. Until such time
as Amurol could keep current with orders,
Atwater thought advertising ill-advised.
Once the back orders were processed,
however, Atwater felt that advertising
would be a good idea, and the parties
agreed to advertise. Hence, the parties
tla
included provisions relating
in the Letter of Intent and in the 19:
Agreement.
The course of dealings between th
parties became strained, ho
wever, becaus
Of Amurol's continual failure to consvy]
with Bouton, much less gain
approval,
Campaign until
advertising
expenditures had been made.
was consulted, Bouton felt c
before embark]
er - >
his consent o
By the time h
ompelled to g
along with the advertisements because o
the considerable sums of
expended.
Bouton was
~
the product. He wanted to
Sports image and felt tha
would
consistent image were built
to convey that image consistently,
wanted to be involved in
process of advertising,
benefit in the lon
S
~rT =" saa ae ee’
ole Yecy a 24ChnoO
+ +h o > Doin +
< it if A 4U0U
r 2 rrr 2 y
s | » whi A ~ + ‘
the > roa a
“ph in Oraer
the creative
and the 198
Agreement gave him that right.
Amurol used the advertising agency of
Needham, Harper & Steers ("NH&S") for its
advertising, as did its parent company,
Wrigley. In 1981, NH&S developed and
Bouton approved a commercial entitled "The
Coach." This commercial was rejected by the
networks, however, because it portrayed an
authority figure telling children what to
do. Accordingly, the commercial never
aired. NH&S then developed the "Mad
Professor" commercial, featuring a mad
scientist concocting shredded bubble gum in
a pouch in his basement. Bouton objected
to Atwater that the commercial was
juvenile, and that it did not properly
reflect the image of the product that
Bouton wished to convey. Bouton approved
use of the commercial, but conditioned his
approval on the running of modified and
better commercials the following year.
NH&S then developed another
mmercial, “You're in the Big Leagues.
Bouton did not like this commercial, and
made his objections known to Amurol and
NH&S. He objected that the commercial
could be used to promote any product, and
that it appeared to be prepared by someone
-
who Knew nothing about-~ sports.
commercial was first shown to Bouton after
the initial creative process and after the
storyboard had been completed. Because of
“the sizable expenditure of time and money
already incurred, Bouton approved the
oh PT °
rou Te Adi
mmercial, and Amurol aired the
the Big Leagues" commercial in 1982.
Bouton then went to another
advertising agency, Della Femina, Travisano
& Partners, Inc. ("Della Femina") to try to
provide Amurol with new ideas. Bouton went
to the Della Femina agency on his own, but
Amurol paid half the fee for consulting
that agency, even though Amurol was not
obligated to do so, and there was no
sal
>
»
+ had
-
-
7
r+
ra
-
‘ -
>
>
»4
. >
i)
M
In the Fall of 1983, Amurol requested
Bouton's approval of a promotion called the
Baseball Bonanza Instant Winner ("Basebal]
Bonanza"). The promotion featured a game
card in each pouch of chewing gun. Each
card had bases on it, and by scratching the
covering off_the bases, the buyer would see
if he or she/had won a prize. Atwater
cross, Tr. 585. Bouton's creative input
was not sought during the developmental and
conceptual stages of the project. By
letter dated February 1, 1984, PTX 82,
Amurol sent Bouton the storyboard for the
Baseball Bonanza commercial. Atwater and
Amurol considered this to be a new
commercial, but the storyboard was
basically the "You're in the Big Leagues"
Storyboard with inserts focusing on the
Baseball Bonanza. Amurol had announced the
Baseball Bonanza Promotion and commercial
rt
© its brokers before Bouton had been
consulted for his approval of the
> 2 ce } | r
(ne Basebal ] Bonanza idve) eme
NH& nad mmitted to the Durcnass I
time for the Baseball Bonanza e7
Bouton refused, nowever, t
nsent I rF about Februar é t
\ . _ > > ° Ar LJ . > >
, 4d 4AzAd et | svi x > .
T WwW a. r : Kade : , ig wr ¢ ’ » :
Atwate then went t tne rat
ré tlor ? wl lesaier fe t
nvent} = A iheirn : ‘ = .
whi ‘ there, poke > B if m hy a er?
r Fr apout February 22, IB4 After
7 a rT rhs Ine > " : <a =7 ‘ ’
iTONn WwW -S2 Freiinquish all appr t
ver advertising and promotior ret
I r a it, 1% r “ liad ré | I
rOYaity payment n tne sale I
HEW In addition, Atwater, igreed t
“Bes , ; r + nt, ’ ‘ : Het
reaqagea
ead the
twatei |
—? ~- PF
s > | |
elephone
ecretary
wv c -~ A
SitScaAaGe eas
he agreem
ecretary
. blen W
‘ T >|
é ¢ Ved 3
+ . 4
« - as
I the
_ "> |
»/ 4 AXA
"YN « >
L ili. \
- | +
reed L
+ —™
L e I illm
* 7 + -
2
Atwater
+ eo +b
2 AmMUI
~ + + ho.
ny tiey
~ + + -¢
cil «.
tn tne
Ss agreement reached wit
telepnone,
At that
;
Lorat nojwwency
UNnageTSlalNalild.
ion
=
c
qave Atwat
Baseball
The m<
ry
—
a8
{2
ri
V
se)
W—)
ou
bud
Sond
> ena
= * hia
~ a ~ a3 +
L,exes , but
gram
headquarters
Silberman c
reached.
ma ; cy hee
sic ~~ - A .
“AMY y
, an | OMpal «
ton ross,
506-08. I
al approvai
sommerciad
7 ~ > 7 A ty? ~- ay
senve Dy AtTWale!l
pecausé
This is the text we talked about.
Will be in touch with Gilson to draw
up final papers next week.
If Amurol Products Company elects to
continue advertising, it will create
and run advertising for BIG LEAGUE
CHEW with a masculine sports theme
featuring the brand in a quote macho
unquote image.
If promotional advertising is run, it
will make every attempt to feature the
brand in the same image.
Any promotions to the consumer will
continue to feature prizes which are
sports-oriented and in keeping with
the image of the brand.
Amurol, in consideration of Jim Bouton
Corporation relinquishing all approval
of advertising and promotions, will,
during the life of the contract,
refrain from introducing another quote
shredded unquote bubble gum which
would compete with BIG LEAGUE CHEW.
POPEYE and BUCKAROO CHEW, already on
the market can continue to be produced
and sold.
Pin Ses
Atwater testified that he and Bouton
had an understanding at that point. The
following colloquy between plaintiff's
counsel and Atwater clearly demonstrates
that Atwater and Bouton had reached an
ro
waS 1tC your understanding that
+h + ,- ~. — + ~ } : L .F +? har
this was do you think you had
= ) 7 +- . Ac c
a mutual understanding as t
, - ~ .
what that clause meant,
noncompete?
te + snmnbL } 1 y
res. I CNINnkK we lad al
WY, + - P
understanding, yes.
Ar ~ ; £- -
And so it would be fair to state
— c7m} A 177 »
tnat Mr. Bouton, as you had you:
_ a. ; . » ; 1™
giscussions in Anahnein, Mr
Bouton understood that he would
cy & ~ > - ++ _ i.
et a 5 percent royalty in the
future?
» ’ .- yr —- ma OKN +
ATI aqgqaitional P < pe! e
WNIiCNnN was proposed Yt [ Mm, y é
Whict wOUuld be a tot f
pe @ on?
SS «
a —_— » — — . "77%11 4 ,
And, in turn, you would not
~ Tr . ~ = - -
compete in the future, is that
correct?
res.
le a + 7. > 7 : ~ '*Feathhalata
And aqgqagitionally, Mr. Bouton
would agree to relinquish his
~ a + _ + : oY UF -
approval rights Over
-ommercials?
[SS «
x x *
7 , ~~ ip uF , 5 +
- « + I am only asking ou if
r = “4 po ++ — at oto te i
you and Mr. Bouton, on or about
i = H+ , ,
the date that you sent your
telex or telegram, Feb:
understood each othe;
=e © | 4
points?
A: Yes. we had
understanding. Yes.
Atwater direct, Tr. 507-09. Despi
Cestimony, Atwater later Said that
petween them as to this modif
be ! agreement until the lawyers f
“GES read and commented on and dre,
igreement ina The partie lgne
Atwater ross, eo 595-9 Atw
> c+ mar —~ : all ao ie a a - 7 o > » _,
LOCSCIMO y O L iS POINT was U 4 i Tie
-Ontradicted his earlier testimony t
anG Bouton had reached an understa
4 ae as) & Atwater's testim ny r
r t Ic a7icc Ingqercii- r 4 2
ii en wap At wD Mii a WU L / y sia A
tnat he thought the telex Was a suffi
Pasis for him tc Produce the Ba
Bonanza commercial, without f
lrm belief that there was no cc
Jt
to
approval from JBC. Atwater cross, iy ae
It is not disputed that Atwater had
authority to bind Amurol. See Atwater
redirect, Tr. 676-77.
Bouton testified that he understood
that the parties were bound from the moment
they reached an agreement. Bouton stated
that the document was to be given to the
lawyers not for their review, but only to
put the terms into more formal languace.
I find Bouton's testimony to have been
credible on this point. He answered
straightforwardly when asked about the
lawyers' roles in drafting the final
agreement, and his answers are consistent
with his statement that he and Atwater had
reached an agreement.
In effect, Atwater knew that he "had
a gun to his head" Atwater direct, Tr. 492,
and needed Bouton's approval to run the
Baseball Bonanza advertisement. To get
what he needed, he agreed to give Bouton
the full 5% royalty and also agreed not to
introduce a competing "shredded gum in a
pouch" product. Bouton, however, insisted
on having something in writing. Bouton
Girect, Tr. 181, 184. The parties did
discuss having the agreement drawn up by
lawyers, but did not contemplate that
lawyers would review the terms of the
agreement. Bouton Direct, Tr.
By letter dated February 28, 1984,
Bouton's counsel confirmed that he no
longer objected to the "Baseball Bonanza"
commercial and authorized Amurol to use the
commercial "based on the understandings as
to modification of the Agreement which is
to be reduced to writing in due course."
DTX-DDD. The February 28 letter spelled
out in further detail the February 22, 1984
modification. Specifically, the letter
stated that Bouton relinquished all
approval of advertising for BIG LEAGUE CHEW
and BIG LEAGUE PLUG; that royalties would
Sta
be paid at the rate of 5% from January 1,
1984 to the end of the Agreement; that
relinquishment of approval over advertising
and promotion did not include
relinquishment of the right to approve
package graphics.
At that time or shortly thereafter,
Silberman requested that Amurol pay Bouton
at the increased royalty rate of 5%.
Atwater thereupon directed Amurol's
accounting department to pay Bouton a
royalty of 5% of net sales without
consulting Amurol's counsel and without
having any written document other than the
February 22 telex and Silberman's February
28 letter. Amurol paid a 5% royalty
retroactive to January 1, 1984, and
throughout the remainder of calendar year
1984. Indeed, an internal Amurol
memorandum dated February 24, 1984 to
Atwater from the BIG LEAGUE CHEW brand
manager discussed where the money for the
additional 24% royalty would come fr
The memorandum deals with the Roya]
Payment Increase to Jim Boutin S] f
Big League Chew, " rather thar t
possibiiity of any proposed increase. I
93.
Productior f the Baseball Bonar
commercial ther went forward ind t
commercial was aired starting on Apri ]
1984. fhe commercial stopped running
tne end of July 1984 or beginning of Auqu
1984. Atwater direct, Tr. 51 hort
after the commercial stopped runnin
Amurol began to press Silberman about t
draft of the final agreement. Amurol d
- uy , .7 . = Tor . . 4 }
not 1n any way inform JBC that it felt that
the 198] Agreement until after t
commercial had stopped running and it h
secured the benefit of the bargain it h
obtained from Bouton, namely, being able
run advertising for which it had alrea
blocked time.
Amurol sought and obtained Bouton's
approval for package graphics in the period
after the modification. Other promotions
were run without seeking Bouton's approval,
such as a jacket giveaway with the Atlanta
Braves, and batting glove giveaways with
the Louisville Redbirds and Texas Rangers.
Thus, as they had operated in the past,
Amurol and Bouton began performing under
the February 22, 1984 telex immediately,
without waiting for execution of a formal
document.
As reflected in their exchange of
correspondence in the week following the
February 22, 1984 telex, the parties
contemplated that the agreement would be
reduced to writing. Bouton cross, Tr. 340-
42; Atwater cross, Tr. 594-97. No letter
or other document indicated that either
party intended not to be bound until the
finalized writing was executed, and no
testimony was given to the effect that one
party said to the other that § final
execution of the agreement was required.
The parties contemplated that the final
writing would not be an entirely new
contract; rather, they expected it to be a
letter agreement, modifying certain
paragraphs of the 1981 Agreement. Gilson
J
N
LJ
direct, Tr. The first mention by
Atwater or anyone acting on behalf of
Amurol to Bouton that an agreement had not
been reached in February came after the
Baseball Bonanza commercial stopped airing
in late July or early August.
Shortly after the February 22 telex
was sent, counsel for the parties reviewed
the document. Gilson, counsel for Amurol,
had a concern about the propriety of the
no-compete clause under the antitrust laws.
Gilson expressed his concern to Silberman,
counsel to Bouton, who had the
responsibility of drafting the formal
. ss ‘ > ‘ _* ’ >
. >
‘ ‘ te. . ~
> ~-= & "; " °
.., : > ‘ : ‘ > ‘
Lal ‘ Lise -«€
> > : ’ Tate.
‘ ‘
> ’
: +» . a tat.
¥
" : ‘ > >> > >
. oS» ~« . P . \ > +
" ‘ _
¥ ~ > . ; -
: , 5 ' > > - > y » —
o~ ‘ ; . . ; ¥ .
. ‘ >> .
‘ : .
‘ ” =
: ‘ °
" > >
" >> : - ‘ > .
yf ‘ > © \w
> a oh lt ot. , ’ 7 = ’
‘ ' ‘ J ‘
" . .
> : . - .
r ‘ ‘ : a a“
*
.
> s
‘ >
" ‘ > ’
a“
‘ .
bed "
> ’ ’
- ‘ rye " te
4 , . q .
oY . ‘ ‘—
.. > = > r ¢ ‘ " "
> ™ " ; ww ‘ -- . ‘
62a
position that the February modification was
of no effect, and the 1981 Agreement then
in force required Bouton's approval. Bouton
refused to approve or disapprove the
advertising, consistent with his position
that under the February 1984 modification
he had relinquished that right.
In January of 1985, Amurol went back
to paying Bouton royalty fees at the rate
of 2:% as provided in the 1981 Agreement.
Bouton then served a notice of breach on
Amurol:
This letter is to inform you that
Jim Bouton Corporation believes that
Amurol Products Company has materially
breached the Agreement dated July 6,
1981 as amended. This material breach
relates to the failure by Amurol
Products Company to remit to the Jim
Bouton Corporation royalties in the
full amount at the rate of five
percent (5%), in accordance with the
modifications to Paragraph 4 of the
Agreement.
Pursuant to Paragraph 27 of the
Agreement, Amurol Products Company has
thirty (30) days within which to cure
its breach. After the expiration of
that time, Jim Bouton Corporation will
have no alternative but to _ seek
redress through the Courts, and
thereby obtain a declaration of its
right to obtain royalties at the rate
of five percent (5%).
PTX 145. JBC did not claim a breach as to
any other provision of the 1981 Agreement
or February modification.? JBC attempted
to work out its dispute with Amurol by
letter dated February 19, 1985, from Amster
to Amurol's counsel, and in that letter JBC
expressly elected not to seek termination
of the 1981 Agreement. DTX RRRRR.
CLAIMS OF THE PARTIES
JBC then filed this action in March
1985, when Amurol refused to pay the higher
royalty rate to which JBC claimed it was
entitled. In its original complaint, JBC
Claimed only that Amurol's failure to pay
. Bouton subsequently filed a
second notice of breach on October 26,
1987, relating to co-packing of BIG LEAGUE
CHEW with other gum products in violation
of the 1981 Agreement. PTX 165. Amurol
cured that breach within thirty days as
provided under paragraph 27 of the 1981
Agreement, and there remains no issue as to
that purported breach.
64a
the full 5% royalty rate violated the 1984
modification to the 1981 Agreement.
Defendant Amurol counterclaimed for the
additional 2% royalty that it had paid
Bouton during 1985. In 1987, however, JBC
amended its complaint to assert additional
causes of action. JBC has asserted three
causes of action against Amurol in its
amended complaint. First, JBC maintains
that the 1981 Agreement was modified by the
February 22 telex, either alone or in
conjunction with the February 28 letter
from Bouton's counsel, and that Amurol
breached the 1981 Agreement as modified.
This is essentially the same claim that
formed the basis of the original complaint.
Second, JBC alleges that, if no
modification of the 1981 Agreement is found
to have taken place, Amurol breached the
1981 Agreement because Bouton withheld
approval of advertising during and after
1985, and was therefore entitled to the
full 5% royalty payment. Third, JBC seeks
a declaratory judgment that Amurol has
anticipatorily breached the terms of the
1981 Agreement by failing to work closely
with Bouton, that such failure will
continue to foreclose Bouton from
meaningfully participating in the creation
and development of advertising, and
therefore warrants the equitable remedy of
rescission of the 1981 Agreement.
JBC has requested the _ following
relief: a determination that the 1981
Agreement was modified in February of 1984;
an award of damages to bring JBC's royalty
payments to 5% for the entire period after
January 1, 1984; an injunction barring
defendants from Manufacturing,
distributing, or selling competing shredded
bubble gum products; an accounting of
defendants' profits by reason of its sales
of competing shredded gum products; a
declaration that defendants have
anticipatorily breached the 1981 Agreement;
a declaration that plaintiff is entitled to
elect to terminate its relationship with
defendants by reason of the anticipatory
breach; and the costs of the action and
reasonable attorney's fees.
WRIGLEY AS A PROPER PARTY DEFENDANT
Bouton contends that Wrigley is a
proper party to this suit because of its
involvement with and control over Amurol.
In sum, Wrigley was mentioned during the
trial with regard to the no-compete
provision, its shipping policies, its
policies on touring manufacturing
facilities and its manufacture of gum at
one point for Amurol. More specifically,
each of these is discussed below, as
follows.
When Bouton pressed Atwater to run the
Miller Lite Beer ad parody, Atwater told
Bouton that Wrigley would not want to get
into a legal battle with the Miller Brewing
Company. Atwater direct, Tr. 496; PTX 82,
86. In the period just before the 1984
modification, Atwater contemplated that if
Amurol could not use the advertising time
it had reserved with NH&S to run the
Baseball Bonanza commercial, Amurol would
advertise another of its products or
Wrigley would take over the time and use it
to advertise Hubba Bubba bubble gun.
Atwater direct, Tr. 504.
Wrigley also came up in connection
with the no-compete provision in the
February 22, 1984 telex. Bouton testified
that Atwater said, "the Wrigley people were
very hot under the collar" about Bouton
owning the trademarks of competing brands.
Bouton direct, Tr. 223; see Atwater cross,
Tr. 617-18. Bouton also testified that
Atwater threatened that Wrigley would come
out with a competing product and let BIG
LEAGUE CHEW "fall by the wayside." Bouton
Girect, Tr. i176. Atwater stated that he
OSa
merely invoked the name of Wrigley because
he was mad. Atwater direct, Tr. 494. The
Court finds his testimony on this point to
have been entirely credible. Atwater
wanted to pressure Bouton into giving in on
the no-compete, and simply used the name
Wrigley because he thought it would have
extra weight.
Paul Rogers, now Chairman of Amurol,
was a "rotating director" of Wrigley in
1979-1980, and at the same time was a
director of Amurol. Bouton never
negotiated with Rogers. Bouton direct, Tr.
115-16. Martin Garrity is vice-president
of production for Wrigley, and was a board
member of Amurol for one year between 1980
and 1988. There is no indication that
Bouton ever negotiated with Garrity.
Atwater is the nephew of William Wrigley
and was vice-president of advertising of
Wrigley from 1974 to 1979, but was never an
officer or director of both Wrigley and
59a
Amurol simultaneously. Atwater direct, Tr.
454-55. No other persons were board
members of Amurol as well as Wrigley
officers; mor were any Wrigley board
members directors of Amurol. Atwater
cross, Ir. 481.
Wrigley and Amurol both use the same
law firm, Willian Brinks, and the same
advertising agency, NH&S. Wrigley and
Amurol have separate sales systems.
Atwater direct, Tr. 538-39. Wrigley and
Amurol also have separate manufacturing
facilities, but when Amurol had a large
backlog of orders to fill shortly after the
initial marketing of BIG LEAGUE CHEW,
Wrigley did manufacture gum, which was then
shipped to be shredded. Atwater redirect,
Tr. 658. Amurol would not let Bouton tour
the manufacturing facility when he came to
tour the Amurol offices because Wrigley and
Amurol have a policy against allowing any
non-employees into its production
70a
facilities. Atwater direct, Tr. 462.
SUBSEQUENT DEVELOPMENTS
While this action was pending, in or
about June of 1987, Amurol introduced a new
shredded gum product under the mark
GARFIELD STRIPES. That product does not
have a sports theme.
On April 18, 1988, counsel for JBC
moved to reopen the testimony and offer
additional evidence, claiming that Bouton
has recently discovered new facts relevant
and necessary to its case. The new
evidence relates to the no-compete clause
of the February modification of the 1981
Agreement. In short, Bouton states that
while attending the National Candy
Wholesalers' Association in San Antonio,
Texas, on February 27-28, 1988, he visited
the Amurol display booth and discovered
prototypes of three new shredded gum
products: KING KONG, GODZILLA and WEREWOLF
shredded bubble gum in a pouch. Affidavit
ila
of Jim Bouton, sworn to on April 15, 1988,
qq 4-5. None of these products has a
sports theme.
CONCLUSIONS OF LAW
THE 1984 MODIFICATION
The Second Circuit has stated that the
primary question in determining whether
parties have bound themselves prior to the
execution of a formal cena is whether
the parties intended to be so _ bound.
Reprosystem, B.V. v. SCM Corp., 727 F.2d
257, 261 (2d Cir.), cert. denied, 469 U.S.
828 (1984). As the Second Circuit phrased
the issue:
Did the parties intend not to be
bound prior to execution of a
formal contract? Or, did they
merely contemplate that their
informal agreement would be
reduced to a formal writing at
some later time?
Reprosystem, 727 F.2d at 261. The starting
point for any discussion of the law must be
the corollary general principles: (1) "if
parties do not intend to be bound by an
“ws i \ '
4 ‘
" \ 7 , |
‘ .
‘ > " ( ; | |
aT -~ . : :
> ° i
; , , ; /* ‘ ‘ ‘ .
‘ . + , ‘
r ) - . | 7
: " 7 ? t t
‘ r Yt @ t |
wt . | 1 ; |
| | ae = . ‘ ‘
a “ } , | |
>> y ry
ae . a — 7 ™ " . >> " >> . _>*
jete? } , wilt i¢ >
“ ‘
. ‘ " ° ‘
- : ; ‘ ‘ xT
‘ ‘ > ' »
‘ P /* ‘ 7
+ ‘ ™
~ : : a :
7 . > F
~
4 -~ P : —
>
‘ ‘ |
le > ™ : . 7 = > > » > > > >
‘ . 7 . . . . a ,
+ ‘ , > > , ~+ > .
: _ . . : _
" ~ . + y .
: ~ : :
e
‘ > ‘ . " bs » .
> ‘ ‘ . ;
> ‘ Z r . .
‘ + } ‘ . > > .
.4 : ‘ -~ . .
¥ ’ > : » ” ¥ > * »
-¢ ‘ ‘ P > ‘ ‘
‘ ‘ ‘ ‘ ’ ‘ :
, a >> " . . ~ ~— + . - + , ’ >
‘ ‘ ‘ . ‘ ‘
* a.4i4 i wi 4
. ~ > > > > > > > :
» v . " . :
‘ ia ‘ iia i¢ CALC) i . :
y + > 7 ‘
ey} ’
e¢ ‘ "
54
e+ ‘ ~~ > } the
\ ’ > F ¥ >
’ »
i¢ \
‘ ae . mis ‘
. ee
" . P
: ‘ ; ‘ ,
" ii |} . |
t > >
; . .
: { o~
t .
é ‘
1 , + ‘
" , |
‘
‘ . . ,
. i - . '-. . , aT a
‘ } >> . 4 _
~ i 17 ¥ ,
’ A
. wT : . 5 '
‘ ‘ ‘ ‘ ;
~ ‘ ’ CW
’ >
‘ : . , i 5a: ‘ ¥
> _— ‘ é ‘ ‘ ; >
‘ ‘ : ‘ } : ‘ rare. 7
> > : ~ + v + = ' ‘ ee
, Zz, i Ps } ‘
} r , > 7 + .
" ©e&Da FA na 72 eT r | | )
; , AIT r , “ete ) > |} >
AANA FLU | © x res
that a binding modification had not been
effected. Accordingly, the first factor
weighs in favor of a finding that the
parties intended to be bound when they
reached agreement on February 22, 1984.
The second factor is whether one party
has partially performed. It is clear that
the conduct of the parties, after the
modification was allegedly reached, ls
relevant in determining whether the parties
had indeed conclusively modified the
agreement. See Farnsworth, Precontractual
Liability and Preliminary Agreements: Fair
Dealing and Failed Negotiations, 87 Colum.
L. Rev. 217, 262 (1987). The conduct of
the parties both contemporaneously with the
sending of the mailgram and after its
mailing indicates that the parties intended
to be bound by the terms of the February
22, 1984 telex. In this case, both parties
partially performed. Bouton relinquished
his right to disapprove of the Baseball
Bonanza commercial, and Amurol began paying
Bouton almost immediately at the rate of
5%. At no time did Atwater or anyone at
Amurol state that the increase in royalty
payments was merely an accommodation.
Accordingly, the second factor weighs
heavily in favor of finding that there was
a binding contract.
The third factor is whether there was
nothing left to negotiate or settle. In
this case, the differences between the
parties later emerged, but those
differences were not present when Atwater
and Bouton agreed to modify the 1981
Agreement. The Court is mindful of Judge
Pratt's cautionary words that:
The actual drafting of a written
instrument will frequently
reveal points of disagreement,
ambiguity, or omission which
must be worked out prior to
execution. Details that are
unnoticed or passed by in oral
discussion will be pinned down
when the understanding is
reduced to writing. These
considerations are not minor;
indeed, above a certain level of
investment and complexity,
requiring written contracts may
be the norm in the _ business
world rather than the exception.
R.G. Group, 751 F.2d at 75. But in this
case, the parties debated over an agreement
for several weeks before the February 22
agreement was reached. That modification
was the product of intense negotiations
between Bouton and Atwater. The parties
negotiated over language, and, when they
finally reached an agreement, they
committed that agreement to writing. The
parties reached a firm understanding, and
this is not seriously disputed. See
Atwater direct, Tr. 506-509.
The fourth factor is whether complex
business matters are involved that would
ordinarily require a writing. In this
case, the course of dealings between the
parties was to have important documents in
writing but not necessarily formally
executed by the parties. For example,
Atwater and Bouton agreed over the
telephone that Amurol would be granted an
extension of time within which to introduce
BIG LEAGUE PLUG. Bouton then confirmed
that understanding in a handwritten letter.
PTX 70. The parties informally agreed to
extend the BUCKAROO CHEW trademark
agreement, and confirmed that understanding
by a telex. Bouton direct, Tr. 219-20;
Neal direct, Tr. 780-81, 788, 790; PTX 122.
Those matters involved significant sums of
money. The amount of money at stake here
was an additional 24% royalty, or an amount
that would total approximately $200,000 per
year at the rate of net sales in 1984.
Surely that is no small amount.
Nevertheless, Amurol's counsel testified
that he expected this to be only a letter
agreement, not a completely new contract.
Gilson direct Tr. 723. That is precisely
what the parties agreed to -- an informal
agreement, in keeping with their customary
SOa
way of doing business.
Application of these four factors
reveals that the parties intended to be
bound before execution by Amurol and JBC of
a final written document.
SUFFICIENCY OF THE 1984 MODIFICATION
Section 15-301 of the General
Obligations Law of New York provides in
pertinent part:
1. A written agreement or other
written instrument which
contains a provision to _ the
effect that it cannot be changed
orally, cannot be changed by an
executory agreement unless such
executory agreement is in
writing and signed by the party
against whom enforcement of the
change is sought. or by his
agent.
N.Y. Gen. Oblig. L. §15-301 (McKinney's
1978). This provision is a Statute of
Frauds requirement, but is more specific
than the general Statute of Frauds
provision under New York Law. See § 5-701.
The purpose of the Statute of Frauds is to
guarantee that there is some evidence of
contract, and that one-party does not
Simply claim that an oral modification was
made without submitting some proof of such
a claim. In this case, it is clear beyond
cavil that there was a writing sufficient
to satisfy section 15-301. The February
22, 1984 mailgram contained the material
provisions of the agreement between Bouton
and Atwater.
The only possible question as to the
enforceability of the February 1984
modification is whether the terms of the
February 22, 1984 mailgram are sufficiently
definite and include all material terms.
The Second Circuit has recently reaffirmed
the well-settled principle that "[t]o be
enforceable an agreement must contain,
either expressly or by implication, all of
the terms deemed material by the parties."
Cinema North Corp. v. Plaza at Latham
Associates, 867 F.2d 135, 140 (2d Cir.
1989); see Enercomp, Inc. v. McCorhill
Publishing, Inc., No. 88-7323, slip op.
2649, 2669-70 (2d Cir. 1989); V'Soske v.
Barwick, 404 F.2d 495, 500 (2d Cir. 1968),
cert. denied, 394 U.S. 921 (1969).
WRIGLEY AS A PROPER PARTY
Plaintiff contends that Wrigley is a
proper party to this suit because there
exists a unity of interest between Amurol
and Wrigley and because "Wrigley dominates
and controls Amurol to such an extent that
Amurol is a mere instrumentality."
Plaintiff's Post-Trial Proposed Conclusions
of Law § 59. This contention is unfounded.
The only evidence of control that plaintiff
has adduced is that Paul Rogers has served
on the board of directors of Wrigley and on
the board of directors of Amurol and that
Martin Garrity served on the Amurol board
of directors and was vice-president of
production for Wrigley. At several times
during the negotiations, Atwater invoked
the name of Wrigley. Beyond that, however,
there was no indication that Wrigley had
any involvement in the dealings here at
issue. First, Wrigley was not a party to
any agreement with Bouton. Amurol and
Wrigley are separate corporate entities.
Even the 1984 modification, which resulted
in part because of Bouton's fear that
Wrigley would introduce a direct competitor
to BIG LEAGUE CHEW, did not’ mention
Wrigley. Bouton has failed to make a
showing sufficient to justify the
extraordinary relief of going’ behind
corporate formalities when they are
maintained in good faith. Plaintiff has
set forth the correct legal standard,
however: in order to go behind corporate
formalities, a party must show:
(1) that the parent controls and
dominates the subsidiary to such
a degree that the subsidiary is
a mere instrumentality of its
parent;
(2) that through its domination and
control of the subsidiary the
parent is perpetrating a fraud
Sta
or working an injustice... ;
and
(3) these elements’ result in an
unjust loss or injury to the
party disavowing corporate
independence, such as the
insolvency of the subsidiary.
United Rubber, Cork, Linoleum and Plastic
Workers v. Great American Industries, 479
F. Supp. 216, 242 (S.D.N.Y. 1979); see
American Protein v. AB Volvo, 844 F.2d 56,
60 (2d Cir.), cert. denied, 109 S. Ct. 136
(1988). As the Second Circuit has recently
noted, there is a presumption of
separateness that is entitled to
substantial weight, American Protein, F.2d
at 60, and Bouton has failed to overcome
that presumption. Accordingly, Wrigley is
not a proper party to the suit and is
hereby dismissed as a defendant.
JBC'S CLAIM FOR BREACH OF THE 1981
AGREEMENT
Bouton contends alternatively that
Amurol breached the 1981 Agreement by its
failure to obtain Bouton's approval for
commercials run in 1985, 1986 and 1987.
Amurol contends, however, that it ran a
commercial that had been approved for 1982,
and that once approval is given, such
approval cannot be withdrawn. Bouton, on
the other hand, contends that he made it
clear to Atwater that he did not approve
the running of "You're in the Big Leagues"
beyond the 1983 advertising season. Bouton
consented to Baseball Bonanza running in
1984 in reliance on what he thought was the
binding 1984 modification. Acting under
that alleged agreement, Bouton refused to
approve or disapprove advertising and
promotions. Because Amurol ran
unauthorized advertising, Bouton claims he
is entitled to an additional 2% royalty as
provided in q 5 of the 1981 Agreement.
In the event that the Court finds that
there was no modification to the 1981
Agreement, JBC claims that the 1981
Agreement was breached by Amurol. In light
Sbda
of the Court's finding that the 1981
Agreement was effectively modified in
February 1984, the Court need not reach
this issue. Nevertheless, for the sake of
completeness, the Court addresses
plaintiff's arguments. Plaintiff has
failed to show that there was a breach of
the 1981 Agreement by reason of Amurol's
failure to pay Bouton a royalty at the rate
of 5%.
JBC relies cn the interrelationship of
paragraphs 4, 5 and i6(a) of the 1981
Agreement to support its position that
Amurol breached the 1981 Agreement. JBC
contends that it had the right to refuse to
approve all advertising, for any reason or
for no reason at all, and thereby to become
entitled to a full 5% royalty. In effect,
JBC contends that because an earlier draft
of the 1981 Agreement provided that JBC
“shall not unreasonably withhold" its
approval, JBC had no obligation to deal
S7a
fairly with Amurol in this regard. Such a
contention is untenable. It is well
settled that there is implicit in every
contract a covenant of good faith and fair
dealing. See, e.g., Durham Industries v.
North River Ins. Co., 673 F.2d 37, 41 (2d
Cir.) cert. denied, 459 U.S. 827 (1982).
The mere fact that the 1981 Agreement did
not explicitly provide that Bouton could
not unreasonably withhold his approval does
not in any way mean that there was no
covenant of good faith and fair dealing in
the contract.
Furthermore, the very terms of the
contract preclude the interpretation that
Bouton seeks here to establish. Paragraph
16(a) provides that materials "shall be
deemed approved if JBC does not notify the
Company in writing to the contrary within
seven (7) days after receipt." JBC has not
notified Amurol that it disapproves of
advertising that Amurol has been running
Sta
because JBC has been operating under the
assumption that the 1981 Agreement was
effectively modified in 1984. Accordingly,
under the terms of the 1981 Agreement, JBC
is deemed to have approved the advertising
and promotions run by Amurol. JBC's claim
for relief for breach of the 1981 Agreement
must, for this reason alone, be denied.
JBC's CLAIM FOR TERMINATION
Plaintiff seeks a declaratory judgment
that Amurol has anticipatorily breached the
1981 Agreement, and that JBC is therefore
entitled to elect to terminate the 1981
Agreement. This view is unfounded in the
facts and in the law. Paragraph 27 of the
1981 Agreement provides that, in the event
of a material breach, the other party may
terminate the agreement by giving the
thirty days notice. At no time did JBC
give notice that Amurol's conduct in this
regard constituted a material breach of the
1981 Agreement. Moreover, plaintiff has
forfeited any right it might have had _°¢t
rescind the 1981 Agreement by continuing t
receive the benefits of the contract after
the events which would arguably be causs
for termination. In such a situation, the
party that chooses to accept the continue
benefits under the contract cannot the
terminate the agreement when it j
convenient. Apex Pool Equipment v. Lee,
419 F.2d 556, 562-63 (2d Cir. 1969). Ay
noted above, Bouton chose not to seek
termination of the 1981 Agreement when i
in
ct?
commenced this lawsuit. See supra p.26;
Bouton cross, Tr. 429-30; DTX RRRRR.
Furthermore, a claim for anticipatory
breach requires unambiguous repudiation o
y
+
+
the contract. Tenavision, Inc. v. Neuman,
45 N.Y¥.2d 145, 150, 408 N.Y.S.2d 36, 3
(1978); Phillips Puerto Rico Core, Inc.
Tradax Petroleum Ltd., 782 F.2d 314, 321-2
(2d Cir. 1985); Restatement (2d) °
Contracts §253; Farnsworth, Contracts
§
"a
’ YT ¢ YT rhé A JTree ert
> ‘ > >| 1TS ent + ‘ i T ¥ }
t t 1 repeatedly a erting t
- « ‘ IS ie: ’ ] er F ‘ +
} tea Tthnat T ntenad t
.O7 I t Dligatlo! Inder t
, 4
y I litTon nas testlrieda tnat
na peen more cooperatlve ince the
ncement I this ACE ON. BOUTOI
‘ + ry 288-89. There tf re : ee ever
‘
t re were ause for Bouton t terminate
the rontract such cause, by Bouton's own
ission, is not sufficiently likely t«
tne 198i Agreement
AMUROL'S COUNTERCLAIM
na counter laimea To!
tne amount Dy wnicn 1ts
Qla
rate it claims should have been paid. In
light of the Court's ruling on Bouton's
claim, it is evident that Amurol cannot
succeed on its counterclaim. There was an
effective modification to the 1981
Agreement, and Amurol has no claim to
recover money paid to Bouton as an
accommodation because Bouton was entitled
to receive that money.
Moreover, even were the Court to rule
in favor of Amurol on Bouton's claim,
Amurol has failed to prove a claim for
relief for unjust enrichment. To state a
cause of action under New York law for
unjust enrichment, a party must show: (1)
that the defendant was enriched, (2) that
such enrichment was at plaintiff's expense
and consists of property rightfully
belonging to the plaintiff, and (3) that
the circumstances require, in equity and
good conscience, that the money be returned
to the plaintiff. Bank of Castle v.
Salerno, 99 A.D.2d 663, 663-64, 471
N.Y¥.S.2d 924, 925 (4th Dep't 1984) ;
Spallina v. Giannoccaro, 98 A.D.2d 103,
105, 469 N.Y.S.2d 824, 826 (4th Dep't
1983); Chase Manhattan Bank v. Banque Intra
S.A., 274 F. Supp. 496, 499 (S.D.N.Y.
1967); see Reprosystem, 727 F.2d at 263.
The facts are clear that JBC was
enriched at Amurol's expense. There is no
Suggestion, however, of any unjust
enrichment of plaintiff. JBC received the
money in exchange for relinquishment of its
advertising approval rights. Amurol made
the payments in order to get out of a
difficult situation. There was never any
mention by Amurol that it was paying the 5%
royalty rate only on condition that an
acceptable final document would be
executed. Indeed, Atwater testified that
it was not until after his attorneys
informed him that he was entitled to get
back the money he paid to Bouton that he
Q3a
thought he could get the money back. At no
time did he suggest to Bouton that the
money advanced was only an accommodation.
Atwater cross, Tr. at 519-20; see Bouton
direct, 77. 285. Under these
circumstances, there is nothing unjust
about plaintiff's retaining the money paid
it by Amurol in 1984.
ATTORNEY'S FEES
JBC has also requested that the Court
grant plaintiff 30% of its attorney's fees
for two reasons. First, it claims that
Amurol's counterclaim is frivolous, and
Sanctions should be awarded for a total of
15% of plaintiff's fees. Second, plaintiff
Claims that it should be awarded an
additional 15% because of Amurol's change
of counsel that required additional
pretrial prreparation and trial examination
of Gilson and Neal. The Court had stated
at a pretrial conference that an award of
counsel fees might be appropriate if the
Y4a
substitution of counsel that resulted when
Amurol's present counsel were substituted
for Willian Brinks caused added expense to
plaintiff. The Court also notes that
Defendants have reserved their right to
seek attorney's fees for the amendment to
the complaint to add plaintiff's second and
third claims for relief. Consistent with
the Court's comments before trial, the
Court will not preclude either party from
making a formal motion for attorney's fees.
Plaintiff's informal application is denied
on the current record.
CONCLUSION
The parties reached an agreement, in
writing, to modify the 1981 Agreement.
Amurol now refuses to abide by that
modification. This it cannot do.
Accordingly, it is hereby ordered that
judgment be entered for the plaintiff on
its first claim for relief that Amurol has
breached the 1981 Agreement as modified by
failing to pay JBC the full 5% royalty to
which it is entitled under the 1984
modification. Plaintiff shall be entitled
to an accounting of the royalties payable
from January 1, 1985 to the beginning of
the option period, and shall _ receive
damages amounting to the difference between
5% and the royalty actually received for
that period. Amurol shall be enjoined from
producing, selling or distributing any
"shredded" gum in a pouch. Amurol shall
make an accounting to JBC of all profits
earned aS a result of the sales of
competing "shredded" gum in a pouch other
than POPEYE and BUCKAROO CHEW and pay to
JBC a royalty of 5% on those sales. In
light of this ruling, it is unnecessary to
reopen the proceedings to accept further
testimony, as requested by Bouton, and
plaintiff's motion to reopen the trial
testimony is denied on this basis.
Wrigley is hereby dismissed as_ an
Qoha
improper defendant. Judgment shall be
entered for defendant on plaintiff's second
and third claims for relief. Judgment
shall be entered for plaintiff on defendant
Amurol's counterclain. Plaintiff's
application for attorney's fees is denied
on the current record.
Plaintiff 1s hereby ordered to submit
a judgment on or before July 28, 1989.
SO ORDERED
Dated: New York, New York
July 7, 1989
Peter K. Leisure
UNITED STATES DISTRICT JUDGE
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.