Crown Equip Corp v. Toyota Materials , 202 F. App'x 108 ( 2006 )

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 06a0798n.06
Filed: October 27, 2006
No. 05-4476
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
CROWN EQUIPMENT )
CORPORATION, )
)
Petitioner-Appellant, )
) ON APPEAL FROM THE UNITED
v. ) STATES DISTRICT COURT FOR
) THE NORTHERN DISTRICT OF
TOYOTA MATERIAL HANDLING, ) OHIO
U.S.A., INC., )
)
Respondent-Appellee. )
)
Before: GIBBONS and MCKEAGUE, Circuit Judges; FORESTER, District Judge.*
JULIA SMITH GIBBONS, Circuit Judge. Plaintiff-appellant Crown Equipment Corp.
(“Crown”), an Ohio corporation engaged in the business of making lift trucks (forklifts), sued
defendant-appellee Toyota Material Handling, U.S.A., Inc. (“TMHU”), a California corporation and
competitor in the lift truck business, in the United States District Court for the Northern District of
Ohio. Crown alleged that TMHU tortiously interfered with Crown’s contractual relationship with
Florida Lift, one of its Florida dealers. The court granted summary judgment for TMHU, holding
that Crown failed to produce evidence showing that TMHU had any specific knowledge of Crown’s
*
The Honorable Karl S. Forester, Senior United States District Judge for the Eastern
District of Kentucky, sitting by designation.
1
contract with Florida Lift when TMHU entered into its contract with Florida Lift or that TMHU
intentionally induced Florida Lift to breach its contract with Crown. The court further held that,
even if TMHU did know of and intentionally interfere with Crown’s contract with Florida Lift,
TMHU’s interference was not improper. For the reasons below, we affirm.
I.
Crown sells lift trucks through a network of dealers. In 1997, Crown and Florida Lift
negotiated a Dealer Agreement for Florida Lift to sell Crown lift trucks in the Tampa, Florida
market. This agreement was renewed every two years, with the last renewal effective until February
28, 2005. Section 3(bb) of the Dealer Agreement limited Florida Lift’s ability to act as a dealer for
any of Crown’s competitors. It read:
Dealer [Florida Lift] shall . . . refrain from (i) acting as a dealer or agent for any
manufacturer or distributor of lift trucks, other than those relationships existing as of
the effective date of this Agreement or (ii) expanding or adding to the types or lines
of lift trucks carried by the dealer or agent as of the effective date of this agreement
into types or lines that compete, in Crown’s sole judgment, with the types or lines
sold by Crown, without the prior written approval of Crown, which shall be provided
only in the event that Crown, at its sole discretion, determines that the addition of
such other relationships, lines, or types of lift trucks shall not in any way adversely
affect Dealer’s ability to fulfill its obligations under this Agreement or otherwise
impede or detract from the sale and service of Crown equipment.
JA 63. The Agreement further provided for termination of the contract by Florida Lift or Crown,
albeit on different terms. While the Agreement allowed Florida Lift to terminate “at any time, with
or without cause, by giving written notice of such termination to Crown,” JA 68, Crown could
terminate only under certain conditions, including “failure by Dealer to honor any promise on
Dealer’s part contained in this agreement or to perform satisfactorily any of the functions, duties, or
obligations imposed on Dealer thereby . . . after Dealer shall have been notified by Crown of such
2
failure and in Crown’s unrestricted judgment shall have failed to correct the same within 60 days
after receipt of such notice.” Id.
In December 2003, TMHU’s Tampa dealer declared bankruptcy after being unable to satisfy
a debt to a TMHU customer. TMHU decided to approach Florida Lift as a potential second dealer
in the Tampa region. Florida Lift had been operating as a joint Crown/TMHU dealer in the Orlando
region, and Jeff Fischer, Florida Lift’s CEO, had previously expressed interest in expanding its
representation of TMHU in the Tampa market. Crown’s senior vice president, Jim Moran, had
notified Fischer, however, that it was “very unlikely” Crown would agree to a Crown/TMHU
dealership arrangement in the Tampa area.
On December 12, 2003, Fischer met with Ronald Roensch, TMHU’s general counsel, and
Joseph Kastelic, TMHU’s national dealer development manager, to discuss an agreement for the sale
by Florida Lift of TMHU’s lift trucks. Aware that Fischer would be contacting Crown regarding the
proposal, Kastelic provided Fischer with a list of existing Crown/Toyota joint dealerships in the hope
it might allay any possible concerns on Crown’s part. Although Fischer attempted to contact Crown
prior to signing an agreement with TMHU, he did not receive an immediate response, and on
December 16, 2003, Florida Lift entered into a dealer agreement with TMHU having not yet
consulted with Crown.
Upon receiving notice of the Florida Lift-TMHU agreement, John Maxa, Crown’s vice
president and general counsel, transmitted a letter to Fischer, dated January 12, 2004, notifying
Fischer that Crown intended to terminate the Crown-Florida Lift agreement if Florida Lift did not
terminate its relationship with TMHU within 60 days. On January 13, 2004, Crown filed a lawsuit
in the United States District Court for the Southern District of Ohio, seeking to enforce the
3
arbitration clause in its agreement with Florida Lift. Crown Equip. Corp. v. Fla. Lift Sys., Inc., No.
3:04-cv-0007-WHR (S.D. Ohio 2004).
On January 23, 2004, Fischer met with Moran and another Crown representative to discuss
the TMHU agreement, the pending lawsuit, and the possibility of Florida Lift’s continuing its
representation of Crown. Moran presented Fischer with three options: (1) abandoning the TMHU
agreement and return to the pre-agreement Crown-only dealership arrangement; (2) selling Florida
Lift to Crown; or (3) allowing Crown to terminate the agreement. Fischer then met with Roensch
and Dr. Shankar Basu, TMHU’s president, in California on Monday, January 26, 2004. Fischer
expressed his view that Florida Lift needed to represent both Crown and TMHU in order to ensure
its financial stability and declined TMHU’s offer to rescind the Florida Lift-TMHU agreement. Basu
then offered to fund Florida Lift’s litigation expenses so that Florida Lift could attempt to retain
Crown as a supplier. As a result of these discussions, TMHU funded Florida Lift’s defense against
the Crown action for termination and breach of contract.
Crown and Florida Lift proceeded to arbitration following a determination by the district
court that the arbitration clause in the Florida Lift-Crown agreement was enforceable. The arbitrator
found that Florida Lift breached its agreement with Crown by entering into an agreement with
TMHU and declared that Crown’s termination of the agreement was justified. The district court
confirmed the arbitrator’s award.
Crown then filed the instant suit against TMHU in the United States District Court for the
Northern District of Ohio, alleging in its second amended complaint a single claim for tortious
interference with a contractual relationship. After discovery, the parties filed cross-motions for
summary judgment. The court denied Crown’s motion but granted TMHU’s motion, determining
4
that Crown had failed to present evidence creating a genuine issue of material fact as to several
elements of tortious interference.
II.
We review a district court’s grant of summary judgment de novo. Williams v. Mehra, 186
F.3d 685, 689 (6th Cir. 1999). Summary judgment is proper “if the pleadings, depositions, answers
to interrogatories, and admissions on file, together with affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter
of law.” Fed. R. Civ. P. 56(c). A “material” fact is one “that might affect the outcome of the suit.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). We view the evidence and draw all
reasonable inferences in favor of the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio
Corp., 475 U.S. 574, 587 (1986).
III.
In order to prevail on a claim for tortious interference with a contractual relationship in Ohio,
a plaintiff must prove that: 1) a contract existed; 2) the defendant knew of the contract; 3) the
defendant intentionally procured the breach of the contract; 4) the defendant was not justified in
procuring the breach of contract; and 5) damages resulted from the breach. Kenty v. Transamerica
Premium Ins. Co., 650 N.E.2d 863, 866 (Ohio 1995) (adopting Restatement (Second) of Torts § 766
(1979)). The existence of a contract in this case is undisputed, but the extent of TMHU’s knowledge
of the contractual relationship and intent to procure the breach of that contract are in dispute, as is
TMHU’s justification for interfering with the contract. As explained below, our analysis begins and
ends with the knowledge prong of the tortious interference test.
The parties do not dispute that TMHU knew, or at least correctly assumed, that Crown had
5
a dealership agreement with Florida Lift. TMHU argues, however, that mere knowledge that a
contract exists is not enough to satisfy the knowledge prong. Rather, it asserts that Crown must
show that TMHU knew that the contract was exclusive in order to satisfy the second prong.1
The Ohio courts have not clarified the degree of knowledge necessary to satisfy the second
prong of the tortious interference test. Under Section 767 of the Restatement, which Ohio courts
have adopted, for an alleged tortfeasor “[t]o be subject to liability . . . , the actor must have
knowledge of the contract with which he is interfering and of the fact that he is interfering with the
performance of the contract.” Restatement (Second) of Torts § 766, cmt. i (1979). We assume that
the knowledge prong under this formulation requires only knowledge of the contractual relationship
sufficient to put the defendant on notice that its actions could interfere with an existing contract.
Crown’s claim is based on TMHU’s alleged knowledge over the course of two distinct time
frames: the period preceding January 26, 2004, before Florida Lift informed TMHU of the nature
of its contractual relationship with Crown, and the period following January 26, when it is
undisputed TMHU knew of the exclusivity provision in the Crown-Florida Lift Agreement. Crown
argues that, during the initial period, TMHU had constructive notice of the exclusivity provision.
As to the second time frame, the parties agree that TMHU knew that the Crown-Florida Lift
agreement was exclusive after the meeting between Basu, Roensch, and Fischer on January 26, 2004.
Crown asserts that TMHU’s continued relationship with Florida Lift after learning of the exclusivity
provision constituted a knowing, continuous interference with Crown’s contractual relationship.
As to the initial period, Crown argues TMHU possessed constructive knowledge of the
1
TMHU concedes that it need not have known the exact terms or wording of the contract;
rather, its claim is merely that it needed to know that Crown’s contract contained an exclusivity
provision.
6
exclusivity agreement and that satisfies the knowledge prong. TMHU responds that constructive
knowledge is insufficient because it improperly incorporates a negligence standard into this
intentional tort. TMHU is correct that Crown’s argument that it must show only that TMHU knew
or should have known of the exclusivity provision wrongly imports a negligence standard into the
analysis; even if TMHU were negligent in not investigating the contract details, it cannot be liable
for intentionally interfering with that contract.2 This is not to say, however, that Crown can only
prevail on summary judgment if it proves by direct evidence that TMHU knew that Crown’s contract
with Florida Lift was exclusive. Rather, Crown need only provide sufficient evidence to support a
“reasonable inference” that TMHU knew the nature of the relationship – i.e., that Crown’s contract
was exclusive. Interroyal Corp. v. Sponseller, 889 F.2d 108, 111 (6th Cir. 1989).3
Crown contends that a jury could infer TMHU’s knowledge on the basis of both general
industry practice and the behavior of the parties during the course of the Florida Lift-TMHU
negotiations. Crown points out that TMHU knew that Yale Materials Handling Corporation and
Raymond Corporation, two other lift truck companies, utilized exclusivity agreements.4 In addition,
2
Ohio law does not recognize the tort of negligent interference with a contractual
relationship. Bauer v. Commercial Aluminum Cookware Co., 746 N.E.2d 1173, 1178 (Ohio Ct.
App. 2000).
3
Other courts have rejected the argument offered by TMHU and held that constructive
knowledge is sufficient to establish the knowledge requirement for tortious interference of
contract liability. See Indy Lube Invs, L.L.C. v. Wal-Mart Stores, Inc., 199 F. Supp. 2d 1114,
1124 (D. Kan. 2002); Tele-Port, Inc. v. Ameritech Mobile Commc’ns, Inc., 49 F. Supp. 2d 1089,
1092 (E.D. Wis. 1999) (noting that constructive knowledge of the facts that would lead a
reasonable person to discover the nature of the relationship is sufficient for liability to attach); D
56, Inc. v. Berry’s, Inc., 955 F. Supp. 908, 916 (N.D. Ill. 1997). These cases apply the tort law of
other states, are not binding on this court, and we decline to adopt their reasoning.
4
Raymond is now owned by Toyota’s parent corporation, but there is apparently no direct
corporate relationship between it and TMHU.
7
Roensch attended a meeting of the Industrial Truck Association in fall 2003 where Raymond’s
exclusivity arrangement was among the meeting topics. Crown also seeks to demonstrate that
TMHU knew of the restriction on multiple dealer agreements by offering evidence that TMHU was
aware of Crown’s likely reaction to learning of a possible TMHU-Florida Lift deal. Crown identifies
a letter from Fischer to TMHU’s parent stating that Crown was “anxious” about Florida Lift’s joint
representation of Crown and TMHU in Orlando. TMHU anticipated that Fischer’s discussion with
Crown would be “prickly” and provided “ammunition” in the form of a listing of existing
Crown/TMHU arrangements in other markets. Moreover, TMHU agreed not to publicize its
agreement with Florida Lift until after Fischer spoke to Jim Moran at Crown.
This evidence is insufficient to show that TMHU knew prior to January 26, 2004 that Crown
had an exclusivity provision in its contract with Florida Lift. There is absolutely no evidence that
Florida Lift or Crown directly notified TMHU of the exclusivity provision. As to TMHU’s indirect
knowledge, whatever TMHU had heard about other manufacturers, there is nothing in the record to
indicate that TMHU knew Crown had adopted a practice of restricting its dealers to Crown products.
In fact, in the Tampa market, Florida Lift sold Komatsu, Daewoo, and Linde lift trucks in addition
to those manufactured by Crown. Likewise, in Orlando, Florida Lift sold both TMHU and Crown
lift trucks, and the Orlando branch of Florida Lift is one of several dealerships selling joint Crown
and TMHU.5 Finally, Fischer had represented to TMHU as late as June 2002 that Florida Lift could
and wished to sell Toyota products in Tampa.
5
At oral argument, counsel for Crown pointed out that, although Crown had allowed its
dealers to enter into distribution agreements with other manufacturers in the past, it had changed
its policy. Counsel provided no explanation of how TMHU would have been aware of the
change in Crown policy.
8
Crown’s argument as to TMHU’s anticipation of a negative reaction from Crown is similarly
unavailing. The record establishes that Roensch knew Fischer wished to speak with Crown prior
to entering into an agreement with TMHU and that Fischer and Roensch expected resistance or
dissatisfaction from Crown. Nothing in the record tends to prove, however, that TMHU had reason
to understand that Florida Lift’s need to notify Crown was anything more than an exercise of
business courtesy6 or that Crown’s concerns were born of anything other than generalized market
competitiveness. We conclude that Crown has failed to demonstrate the existence of a genuine issue
of material fact as to TMHU’s knowledge, direct or indirect, of the exclusivity provision prior to
January 26, 2004.
Crown offers a second argument, however, concerning TMHU’s actions after January 26,
2004, when it became aware of the exclusivity provision. Crown contends that TMHU’s failure to
withdraw from its relationship with Florida Lift after learning of the exclusivity provision constituted
continuing interference with the Crown-Florida Lift relationship. Evidence of post-breach behavior
is certainly relevant in intentional interference claims insofar as it provides insight into the
defendant’s pre-breach knowledge or state of mind. However, evidence that a defendant learned
material facts after the breach occurred is not probative of the defendant’s knowledge or state of
6
Crown insists that a district court has rejected TMHU’s explanation of its understanding
of why Florida Lift needed to consult with Crown prior to entering into an agreement with
TMHU. This is not entirely accurate. A district court judge did dismiss as an “after the fact
rationalization,” JA 635, Florida Lift’s attempt to minimize its own culpability by arguing that it
did not believe it required Crown’s permission to enter into other dealership agreements and
notified Crown out of courtesy. The district court judge made that determination in the context
of an application for a preliminary injunction in a separate proceeding initiated by Crown against
Florida Lift. A finding that Florida Lift understood its obligation to inform Crown is irrelevant,
however, to the issue of TMHU’s knowledge of that obligation unless Florida Lift communicated
that information to TMHU. There is no evidence of that.
9
mind at the time of breach. Thus, the fact that TMHU learned in January 2004, that the Crown-
Florida Lift contract was exclusive does not suffice to prove that TMHU knew the nature of the
Crown-Florida Lift relationship in December 2003, when Florida Lift breached the contract. By
January 26, 2004 the date on which TMHU learned of the exclusivity provision, any interference had
been fully accomplished.
Crown further argues that TMHU’s defense of Florida Lift during litigation was tortious,
constituting part of a plot to force Crown to continue dealing with Florida Lift during the course of
the litigation in order to switch Crown customers to Toyota products. This theory cannot succeed.
TMHU’s post-negotiation conduct was not a new breach but rather constituted the determination of
the legal consequences of that breach.7
We find that Crown has failed to present evidence creating a genuine issue of material fact
as to TMHU’s knowledge of the exclusivity provision governing the relationship of Florida Lift and
Crown. This conclusion is dispositive of Crown’s claim, and we need not consider the other
elements of the tortious interference test.
IV.
For the reasons above, we AFFIRM the judgment of the district court.
7
Moreover, TMHU’s asserted continuing breach argument ignores the fact that Florida
Lift was justified in pursuing its trial strategy, particularly in light of precedent against Yale and
Raymond that held exclusivity agreements unenforceable. Because Florida Lift’s defense cannot
be construed as anything but protection of Florida Lift’s right to judicial process, neither can
TMHU’s participation in that defense be countenanced as legal interference with contract.
Further, there is no evidence that the decisions as to the litigation were made by TMHU rather
than Florida Lift. The record indicates that TMHU’s funding of Florida Lift’s defense was a
legitimate business strategy based on TMHU’s desire to ensure the financial stability of its new
dealer, not a plot to force Crown to deal with its intransigent dealer. As the district court noted,
TMHU offered to release Florida Lift from its contractual obligations to TMHU. Florida Lift
declined and chose to proceed with its defense.
10