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Andes Trading De Mexico, S.A. De C.V. v. Church & Dwight Co., Inc.

A-2355-05T5 (N.J. Super. App. Div. 2007) (Unpublished)

CONTRACTS; TORTUOUS INTERFERENCE — Where the subsidiary of a company acts as an agent of its parent company, within the scope its employment, actions that interfere with a party that has contracted with the subsidiary’s parent company cannot be considered an act of tortuous interference.

A manufacturer and distributor had a five year contract in which the distributor was to be the exclusive distributor of the manufacturer’s products in a foreign market. Around the same time the agreement was made, the manufacturer acquired a corporation which had a subsidiary that distributed products in the same market. The manufacturer later unilaterally terminated its relationship with the distributor long before the term of the contract between the two parties expired. The distributor brought an action against the manufacturer for the breach of their agreement, fraudulent inducement, and a breach of the covenant of good faith and fair dealing. The distributor also brought a claim against the subsidiary and its financier for tortuous interference regarding their infringement of the contractual relationship between the distributor and manufacturer.

At trial, the distributor called an expert economist who testified that the market in question was viable for items that were due to be distributed by the distributor but were instead distributed by the manufacturer’s subsidiary. The manufacturer’s attempt to exclude the testimony was denied. This expert witness discussed the retail market share that the manufacturer could have been expected to receive. The jury returned a verdict awarding the distributor $15,000,000 in lost-profits damages. The lower court denied the manufacturer’s requests to set aside the jury’s verdict or grant a new trial, but did granted a remittitur, a lowering of the damages to $9,800,000, the amount opined by the damages expert. The manufacturer did not dispute the finding that a breach of contract had occurred but appealed the amount of the award. The distributor cross-appealed the lower court’s decision to reduce the damages.

The manufacturer appealed the lower court’s decision to allow the testimony of the expert witnesses for the distributor and the lower court’s refusal to instruct the jury regarding improprieties in the distributor’s closing argument. The distributor appealed the lowering of the damages by the lower court and the lower court’s dismissal of tortuous interference claims against the subsidiary distributor and its financier for infringing on the distributor’s market.

The Court rejected all of the manufacturer’s assertions regarding the testimony of the distributor’s expert witnesses. It upheld the lower court’s determination that the expert economist’s retail calculations would assist the jury in its evaluation of the damage expert’s projection of the potential market penetration and also that the expert economist’s testimony did not improperly bolster the testimony of the damages expert. The Court also denied the manufacturer’s claim that the expert economist’s use of retail statistics to indicate the potential share of the manufacturer’s wholesale market was misleading, speculative or unduly prejudicial and upheld the lower court’s inclusion of his testimony. The manufacturer’s claim that the lower court abused its discretion by allowing the testimony of the damages expert was also rejected by the Court and the inclusion of the testimony was upheld.

The Court did agree with the manufacturer that the lower court erred in not instructing the jury to disregard a portion of the distributor’s closing testimony that was not supported by the evidence presented. The Court also agreed with the manufacturer that the amount awarded by the jury was in excess of the largest amount supported by the evidence, but concluded that the remittitur granted by the lower court had avoided an unjust award of damages. It found the lower court’s reduction of damages appropriate since liability was not in question, only the amount of damages to be awarded. For these reasons, the Court rejected the distributor’s claim that the remittitur order should have been vacated. It also noted that the lower court’s use of remittitur served to avoid a new trial, which is encouraged by the courts.

The distributor’s appeal on the lower court’s dismissal of tortuous interference against the subsidiary distributor and its financier was also rejected by the Court. The Court upheld the lower court’s dismissal of these claims because the acts of infringing on the contractual relationship between the manufacturer and distributor occurred after the subsidiary distributor was acquired by the manufacturer. Since the infringement occurred following the acquisition, the subsidiary distributor acted as an agent of the manufacturer, within the scope of employment, and under New Jersey law these actions cannot be considered to be an act of tortuous interference.

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