Patton v. Mid-Continent Systems, Inc.

Patton v. Mid-Continent Systems, Inc.

Opinion

 [*744]  POSNER, Circuit Judge.

The defendant, Mid-Continent Systems, appeals from a damages judgment entered upon a verdict for the plaintiffs (James Patton and R.L. Hildebrand, and their corporations) in a diversity breach of contract action. The jury awarded Patton and his company $ 592,000 in compensatory damages, and Hildebrand and his company $ 186,000. The jury also awarded the plaintiffs $ 2,250,000 in punitive damages, but the judge reduced this award to $ 100,000. Mid-Continent argues that it was entitled to a directed verdict on liability, that there was error in the jury instructions, that the compensatory damages were excessive, and that there was no legal basis for an award of punitive damages.

Mid-Continent [**2]  provides a credit card that enables truck drivers to charge fuel and related expenses incurred at truck stops. In 1971 Patton, who operated a truck stop on Interstate Route 94 in Burns Harbor, Indiana, and Hildebrand, who operated a truck stop a few miles east on I-94 at New Buffalo, Michigan, entered into a franchise agreement with Mid-Continent. The agreement gave Patton and Hildebrand a specified territory, and authorized Mid-Continent to franchise additional truck stops in that territory only if the franchisees, upon being informed by Mid-Continent that additional coverage was required and upon being given the "first opportunity" to meet the requirement, failed to obtain the additional facilities needed.

In 1974 Mid-Continent franchised Truck-O-Mat, a truck stop located on I-94 west of the Patton and Hildebrand stops and just across the Illinois border; and beginning no later than 1976, Patton and Hildebrand complained to Mid-Continent that Truck-O-Mat's stop was in their territory, in breach of their franchise agreement. That is one of the alleged breaches; here is the other. In 1980 Mid-Continent decided it needed additional coverage in the territory occupied by Patton and [**3]  Hildebrand, and so informed Patton in a letter that concluded, "We feel that a response within fifteen (15) days and a plan of action within thirty (30) days is reasonable." Two months later Patton replied, "We are working with a real estate broker to establish the coverage that you think is not covered," but added, "Before we invest much more money into this project, I would like to know what you are going to do with the other fuel stop in our franchise area. Mr. Hildebrand and I complained to you, in your office, about this over three (3) years ago. At that time you agreed that it was indeed in our area. To our knowledge there still has been nothing done." Mid-Continent replied by acknowledging that Truck-O-Mat was in the plaintiffs' area and by offering to cancel Truck-O-Mat's franchise if and when the plaintiffs gave Mid-Continent the additional coverage that it desired. There was no immediate response; and seven weeks later (November 1980) Mid-Continent mailed Patton its "notification that you have been given 'right of first refusal' [and] . . . that I am now taking steps to fill this requirement." The "taking steps" involved Truckstops of America, which had opened a stop in [**4]  Gary, Indiana (near Burns Harbor, the site of Patton's stop) in May 1980. Even before then, in April, the plaintiffs had seen a Mid-Continent sign lying on the ground at the Gary site and had complained to Mid-Continent, which had ordered Truckstops of America to get rid of the sign, and it did. No Mid-Continent credit cards were accepted at Truckstops' Gary stop until November 1980 -- when Mid-Continent franchised that stop in order to obtain the additional coverage that it wanted.

We begin our analysis with the franchising, allegedly in breach of the plaintiffs' franchise agreement with Mid-Continent, of Truck-O-Mat. The description of the plaintiffs' territory in their franchise agreement is ambiguous. Mid-Continent concedes that it was a question for the jury whether Truck-O-Mat's stop was in that territory, in which event the franchising of the stop violated the agreement, but argues that Patton's truck stop, at Burns Harbor, was not a franchised location. If this is right, Patton has no standing to complain about the invasion of his territory -- he has no territory -- even though the negotiating history makes perfectly clear  [*745]  that Mid-Continent thought it was franchising [**5]  two truck stops in the same territory, Patton's at Burns Harbor and Hildebrand's at New Buffalo.

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