Advance Sign Group, LLC v. Optec Displays, Inc.

Citations: 722 F.3d 778; 2013 WL 3491277; 2013 U.S. App. LEXIS 14186Docket: 12-3321

Court: Court of Appeals for the Sixth Circuit; July 15, 2013; Federal Appellate Court

Original Court Document: View Document

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Advance Sign Group, LLC filed a diversity action against Optec Displays, Inc. for breach of contract, unjust enrichment, and tortious interference following a failed business collaboration. A jury ruled in favor of Advance Sign on the breach of contract and tortious interference claims, awarding damages. Optec's post-trial motions for judgment as a matter of law and for a new trial or remittitur were denied by the district court, leading to Optec's appeal. The agreement between the parties, initiated in 2005, involved Optec selling electronic messaging signs to Advance Sign at discounted prices, while Advance Sign agreed to exclusively sell Optec's products and prevent direct sales to customers introduced by Advance Sign. A successful pilot project with Sonic Restaurants prompted further negotiations, resulting in a second agreement where Optec would pay Advance Sign a twelve percent commission on sales to foodservice customers introduced by them. Although a letter summarizing this agreement was sent and revised, it was never signed by McHugh, prompting further attempts by Advance Sign to finalize the agreement. The district court's judgment was ultimately affirmed.

Shu Wu, President of Optec, attended a meeting where an arrangement was proposed to make Advance Sign the primary sales agent for Optec’s foodservice clients, regardless of how Optec acquired those clients. In return for this expanded role, Advance Sign would receive a commission of less than twelve percent on sales to Sonic, although no agreement was reached on the commission rate. Advance Sign documented the terms, requiring a two percent commission on all sales to Sonic, which was sent to Optec, but Optec neither signed the August agreement nor paid the commissions from the June or August contracts.

On November 21, 2006, Wasserstrom expressed frustration via email to Wu regarding Optec's failure to meet its obligations. Six days later, Optec’s National Accounts Manager, Shawn Klinger, emailed Sonic’s Vice President, Steve Reed, attributing installation issues at Sonic locations to Advance Sign’s use of non-preferred contractors and recommending that Sonic manage the installation process. Klinger shared this draft email with his supervisor, McHugh, prior to sending it.

Consequently, on January 22, 2007, Reed suggested that Optec remove Advance Sign from the project, allowing Optec to handle installations directly. Optec subsequently entered a two-year agreement with Sonic, becoming an approved supplier and installing signs at around 1,400 locations.

Advance Sign initiated a lawsuit against Optec for breach of the 2005 and 2006 agreements, as well as unjust enrichment and tortious interference. The jury ruled in favor of Advance Sign on the breach of contract and tortious interference claims, awarding $3,444,000 for the breach of the 2006 commission agreement, based on the June terms, and $1,029,000 for tortious interference. Optec’s post-trial motions for judgment as a matter of law and for a new trial were denied by the district court. Optec has appealed these denials, contesting the existence of a meeting of the minds, the applicability of Ohio’s Statute of Frauds, the sufficiency of Advance Sign’s tortious interference claim, and the evidence supporting the jury's damage awards.

Optec contends that the district court wrongly denied its motion for judgment as a matter of law regarding Advance Sign's claims for breach of the commission agreement and tortious interference. The Court reviews such denials de novo, applying federal standards for legal questions and Ohio law for evidentiary sufficiency. Evidence must be viewed favorably to the nonmoving party, and motions are denied if reasonable minds could differ. 

In addressing the breach of the 2006 Commission Agreement, Optec presents two arguments: first, that the evidence does not support the jury's conclusion of a meeting of the minds regarding the June version of the contract; second, that the Statute of Frauds prevents enforcement of this contract version. For a contract to be enforceable, there must be mutual assent on essential terms, with the burden of proof on the party claiming the agreement exists. 

Ohio law treats "mutual assent" and "meeting of the minds" as interchangeable concepts, requiring that each party either promises or begins performance. The manifestation of assent can occur through words or actions, and determining whether such assent exists is a factual question based on all relevant circumstances. In this instance, mutual assent is evident as Advance Sign performed by introducing Optec to foodservice clients, while Optec promised to pay a 12% commission on sales to Sonic. The oral nature of Optec's promise does not negate the manifestation of mutual assent.

Advance Sign and Optec reached a mutual agreement on a commission in June 2006 after nearly three months of negotiations. Testimonies from Wallace and Wasserstrom confirmed McHugh's acceptance of a twelve percent commission for Sonic-related business and foodservice accounts, with Wasserstrom asserting certainty about the agreement's existence. When Optec sent the agreement to McHugh for signing, he made only a minor amendment, indicating acceptance rather than rejection of the commission terms. Additionally, Wallace noted that an August 2006 trip to California would not have been necessary if Optec had honored the agreement, suggesting the jury's finding of a mutual agreement was reasonable. 

Optec contended that if the June agreement was valid, the jury's decision against a mutual understanding on the subsequent August agreement was unreasonable. However, attendees testified that no conclusion was reached regarding the commission rate at the August meeting, allowing for a jury's reasonable conclusion that the June agreement remained in effect.

Regarding the enforceability of the June agreement under the Ohio Statute of Frauds, which requires written contracts for agreements that cannot be performed within one year, the June agreement was deemed to have an indefinite duration. The possibility of performance within a year existed at the time of the agreement, as it was uncertain how many signs Sonic would purchase. The later two-year agreement with Sonic, established in January 2007, did not affect this assessment, and even considering it did not negate the possibility of the June agreement's performance within a year. Thus, the June commission agreement does not fall under the Statute of Frauds.

Optec's agreement with Sonic allowed it to be an approved supplier for two years but did not obligate Sonic to make purchases from Optec during that time. The district court correctly denied Optec's motion regarding the breach of contract claim. Regarding the tortious interference claim by Advance Sign, the court instructed the jury that to succeed, they needed to find that: 1) there were existing or prospective business relationships between Advance Sign and Sonic; 2) Optec was aware of these relationships; 3) Optec intentionally acted to interfere; 4) Optec lacked justification for its actions; and 5) Advance Sign suffered injury as a direct result. Optec contended that Advance Sign failed to establish the third, fourth, and fifth elements, arguing that the sole evidence for intentional interference was an email from Klinger to Reed that was meant to suggest improvements, not to interfere. However, the district court noted the email indicated an intention to take business from Advance Sign, as it requested management of the entire installation project. This request was granted by Sonic two months later. The timing and content of Klinger’s email, particularly following a critical email from Wasserstrom regarding Optec's obligations, supported the jury's conclusion of intentional interference. For the justification element, the jury was instructed that interference is improper if it lacks justification. Optec claimed it was acting to protect its reputation due to Sonic's concerns about installations. The jury could reasonably find that Optec was not acting in good faith, particularly given its prior breach of the 2005 agreement and testimony that Klinger’s criticisms were false. The subsequent assignment of installation work to Optec further suggested an intention to take business from Advance Sign rather than merely a protective action.

Assessment of the fifth factor indicates that Advance Sign’s injury was a proximate result of Optec's actions. Proximate cause requires that an act naturally and continuously leads to a result that would not have occurred without it, as established in Strother v. Hutchinson. Optec contends that Advance Sign failed to prove injury from Klinger’s email, citing Sonic representatives who stated there was no interference with their business relationship. However, a reasonable jury could find that Klinger’s email prompted Sonic’s decision to exclude Advance Sign from the installation process. Testimony from Reed indicated that his recommendation to remove Advance Sign was based solely on information from Klinger or McHugh regarding Advance Sign's performance, suggesting that Klinger’s email influenced Reed’s opinion.

The jury reasonably concluded that Optec tortiously interfered with Advance Sign’s relationship with Sonic, leading to the district court's denial of Optec’s motion regarding the tortious interference claim. Regarding Optec's motion under Federal Rule of Civil Procedure 59, which challenged the jury's damages findings for breach of contract and tortious interference, a review is conducted under an abuse-of-discretion standard. Rule 59 requires a new trial only for a "seriously erroneous result," such as a verdict against the weight of evidence or excessive damages. The court reviews damage awards with extreme deference, allowing them to stand unless they are unreasonable, shocking, or mistaken.

The jury awarded Advance Sign $3,444,000 for Optec's breach of the June 2006 commission agreement, calculated by multiplying the number of electronic messaging signs sold (1,400) by the net price per sign ($20,500) and the commission rate (12%). Optec's claim for remittitur is based on its assertion that the June 2006 agreement was invalid and thus the commission rate was inapplicable. However, since sufficient evidence supported the jury's finding of the agreement's validity, Optec's argument lacks merit. Additionally, the jury awarded Advance Sign $1,029,000 for damages related to Optec's tortious interference with its business relationship with Sonic.

The jury determined damages of $1,029,000 by multiplying the 1,400 electronic messaging signs sold by Optec to Sonic by Advance Sign's average profit of $735 per installation. Optec contends this damages figure lacks sufficient evidentiary support. There was no formal agreement between Advance Sign and Sonic or between Advance Sign and Optec regarding future installations after Sonic removed Advance Sign from the process. However, evidence shows that Advance Sign had exclusively managed Sonic's installations prior to Optec's involvement and had initiated the pilot project, as well as facilitated Optec's connection to Sonic. Given this context, it is reasonable to infer that, without Optec's interference, Advance Sign would have remained the exclusive installer for Optec's signs at Sonic locations. The district court's decision to uphold the jury's award is deemed appropriate, and the judgment is affirmed.