Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—Mich. App.: Award of $1.1M for jobber’s contract breach, conversion upheld, (Nov 17, 2014)

By John W. Arden, J.D., LL.M.

A gasoline sub-jobber was entitled to a jury award of $1.1 million for its jobber’s breach of contract and conversion in an attempt to terminate the sub-jobbership, the Michigan Court of Appeals has ruled. However, the jobber was entitled to recover $33,781 for the sub-jobber’s nonpayment of fees (Pantall Gallup, LLC v. Alnouri, November 6, 2014, per curiam).

Pantall Gallup, LLC is a wholesale provider of petroleum products, called a “jobber” in the industry. It obtains products—including gasoline—from large oil companies and sells them to gasoline stations, often through intermediaries called “sub-jobbers.” Express Oil was one such “sub-jobber.” It obtained customers, negotiated the terms of new contracts on behalf of the jobber, and collected money from the customers on behalf of the jobber. The oil company sets the daily price for gasoline, and the jobber adds the cost of freight and other expenses and relays the price to the sub-jobber. The sub-jobber adds a few cents per gallon for its own profit and changes the final price to the customer.

In 1997, Pantall and Express Oil entered into a sub-jobber agreement, which then was automatically renewed for another 10-year period in July 2007. Under the agreement, Pantall was to provide petroleum products to Express Oil, which was to provide billing and collection services for Pantall. In practice, Pantall delivered petroleum products to the customer and directly invoiced them, while Express Oil collected payments and submitted them to Pantall. Pantall then remitted three cents per gallon of petroleum products to Express Oil as commission.

After renewal of the agreement in 2007, Pantall began deducting what Express Oil thought was an inappropriate amount from the monthly commissions. In July 2008, Pantall attempted to terminate the agreement. Express Oil initiated this action. Pantall claimed that it had not received all of the money for products it had delivered to customers, and that Express Oil had breached the agreement and engaged in conversion and fraud, including its depositing of customer receipts and payment of its expenses. Specifically, Express Oil alleged breach of contract and conversion by Pantall, which brought a counterclaim of brought breach of contract and conversion.

At trial, a jury found that Pantall breached the sub-jobber agreement and awarded damages of $1.1 million and that Express Oil breached the agreement but was not the first to do so. It found that the owner of Express Oil converted property belonging to Pantall and awarded damages of $33,781. The trial court trebled the damages assessed against the owner of Express Oil. All parties filed post-judgment motions, which were denied. On appeal, Pantall contended that the trial court erred in denying judgment on the verdict on the breach of contract and conversion claims against it, erred in allowing the testimony of Express Oil’s expert, and erred in entering judgment against it. It requested a remittitur.

Expert witness. Pantall took issue with the figures used by Express Oil’s expert in calculating lost profits from the time of the breach to the end of the agreement in June 2017. The expert looked at gross monthly revenue and subtracted reasonable expenses and then multiplied by the number of months remaining on the agreement. Based on the nature of the testimony and the indication that it constituted opinion based on experience, the trial court did not err in admitting the expert’s testimony, the Michigan appellate court held. The expert testified that he relied on the Express Oil’s sworn answers to interrogatories in making these calculations. Moreover, Pantall did not offer any expert testimony of its own to controvert the view that the expert’s methods were unreliable or unreasonable. Finally, disagreement with an expert’s opinion goes to the weight given the testimony, not to admissibility. Thus, the trial court did not abuse its discretion in admitting the expert testimony.

Spoliation of evidence. Pantall’s claim that Express Oil’s claims should have been dismissed for spoliation of evidence was rejected. Dismissal of a case is a drastic step, the appellate court remarked. Before imposing such a sanction, the trial court must consider lesser sanctions, such as exclusion of evidence that might prejudice the other party or the inclusion of an instruction that the jury may draw an inference adverse to the culpable party. In this instance, it was clear that Express Oil had all of its records at the time Pantall attempted to terminate the sub-jobbership, but did not once it was clear that litigation would ensue. The appellate court held that the timing of this motion for dismissal as a sanction was inappropriate. Pantall did not raise it at the directed verdict stage. Moreover, there was no indication that Express Oil’s conduct was egregious or deprived the defendants of a fair trial.

First breach. A contention that the trial court erroneously found that Pantall initiated the first breach of the parties’ agreement was denied by the appellate court, which found that the alleged dissolving of Express Oil did not necessarily constitute a material breach and that Express Oil’s conversion did not pre-date Pantall’s breach.

Treble damages, attorney fees. The trial court did not abuse its discretion by awarding Express Oil treble damages and attorney fees. Michigan law allows trebling of damages and the award of attorney fees for the stealing, embezzling, or conversion of property or the aiding in the concealment of stolen, embezzled, or converted property. The parties in this case had agreed that the award of treble damages and attorney fees were administrative matters and should not be presented to the jury. The issue was a question for the trier of fact and therefore should have been presented to the jury. However, under the circumstances, the trial court’s exercise of discretion in awarding treble damages was not outside the range of reasonable and principled outcomes.

The case is No. 314852.

Attorneys: Timothy A. Diemer (Jacobs and Diemer, PC) for Pantall Gallup, LLC, Van Buren Oil LLC, and Barrick Enterprises Inc. Mark R. Bendure (Bendure & Thomas) for Mohamad Alnouri, Express Gas Co., and Express Oil Co.

Companies: Pantall Gallup, LLC; Van Buren Oil LLC; Barrick Enterprises Inc.; Express Gas Co.; Express Oil Co.

Cases: FranchisingDistribution MichiganNews