Opinion ID: 652883
Heading Depth: 1
Heading Rank: 4

Heading: lightning lube's cross-appeal

Text: 103 In its cross-appeal, Lightning Lube first challenges the district court's grant of judgment as a matter of law and a conditional new trial to Witco on Lightning Lube's claims that Witco committed fraud by not disclosing its intent to compete against Lightning Lube in a joint venture with Avis and misrepresenting its intent at the time of entering into the contract with Lightning Lube not to fulfill that contract. The jury awarded Lightning Lube $1 million in compensatory damages on each of these claims. Because we will affirm the district court's grant of judgment as a matter of law on the two fraud claims, we need not address the district court's alternative holding granting a conditional new trial on them. 104 The elements for actionable fraud under New Jersey law are proof that the defendant made (1) a material misrepresentation of present or past fact (2) with knowledge of its falsity (3) with the intention that the other party rely thereon (4) and which resulted in reasonable reliance by plaintiff. Jewish Ctr. of Sussex County v. Whale, 86 N.J. 619, 432 A.2d 521, 524 (1981). Depending on the remedy sought, an action for fraud may be either legal or equitable in nature. Jewish Ctr., 432 A.2d at 524. A plaintiff asserting a claim of legal fraud must show that the defendant acted with scienter, id., but only need prove the elements of fraud by a preponderance of the evidence. Batka v. Liberty Mut. Fire Ins. Co., 704 F.2d 684, 688 (3d Cir.1983). In contrast, a plaintiff advancing a claim of equitable fraud need not demonstrate scienter, Jewish Ctr., 432 A.2d at 524, but must establish the other elements of fraud by clear and convincing evidence. Batka, 704 F.2d at 688. Because Lightning Lube alleged fraud to recover money damages it was required to prove that Witco acted with scienter, but it was held only to the preponderance standard as to all the elements of fraud.
105 The crux of Lightning Lube's nondisclosure claim was its contention that Witco and Avis already had agreed to form a joint venture, or at least were negotiating to that end, before the spring of 1986, when Lightning Lube and Witco reached an agreement. Thus, according to Lightning Lube, Witco knew before it reached its agreement with Lightning Lube that it would be competing against it. Lightning Lube asserted that had it known of the alleged negotiations between Witco and Avis, it never would have made its arrangements with Witco in May 1986. In attempting to prove the timing of the Witco-Avis agreement, Lightning Lube conceded that Avis and Witco officially announced their venture in December 1986, but it offered documents which were purportedly drafts of the partnership agreement and were dated January 1986, and April 1986, respectively. (PX 18 and 18A). The district court stated that only the cover letters on these documents were dated 1986, and that the internal pages were dated 1987. But our examination of the drafts indicates that every page of the supposed partnership drafts was dated 1986 at the lower right corner and that the cover pages were dated 1987. In addition, Lightning Lube submitted handwritten notes by Harvey Golublock, a Witco vice president, dated 4/21/86 and referring to an April 14 draft agreement between Witco and Avis. 106 In an effort to contradict Lightning Lube's theory that Witco-Avis negotiations were underway as early as January 1986, Witco called Jeffrey A. Baumel, an attorney from the New York law firm of Bachner, Tally, Pollavoy and Mishin. Baumel testified that he drafted the partnership documents; that he did not join the firm as an associate until May 1986; and that he prepared the draft partnership documents from scratch based on a letter of intent (PX 591), prepared December 11, 1986, that was given to him by one of the partners. Baumel also testified that he saw nothing in the Witco file which indicated that another attorney at the firm worked on a partnership agreement between Witco and Avis before he did. Thus, he claimed that the partnership documents could not have been prepared before 1987. 107 Baumel did not dispute, however, that PX18 and PX18A were genuine, or that they were typed at his firm. Instead, he maintained that the dates of 1/13/86, and 4/14/86 must have been typing errors because he prepared the documents on January 13, 1987, and April 14, 1987. 108 Golublock initially testified during his examination by Lightning Lube that the partnership documents were typed by a word processor at Witco. But, during his cross-examination by Witco, he changed his testimony, claiming his initial statement was based on a misunderstanding of Kramer's question. He then claimed that in 1986 Witco did not have word processing capabilities and thus the drafts must have been typed at Baumel's law firm. Golublock further testified that the date on the handwritten notes was a mistake, and that he meant April 14, 1987. In order to support this claim, he pointed out that the handwritten notes refer to a center in Elmont, N.Y., that the Witco-Avis joint venture was planning to open. The notes state that the venture had just obtained a building permit. Witco's counsel showed Golublock a copy of the building permit, which was dated April 1987. Thus, Witco argued that because the permit to which the notes referred was dated 1987, the notes must have been written in that year. 109 In its opinion, the district court ruled that the evidence introduced by Lightning Lube did not alone support a finding of fraud. 802 F.Supp. at 1187. The court also found that Baumel's testimony rendered Lightning Lube's theory of an Avis-Witco deal before December 1986 implausible. Id. In addition, the district court held that even if the evidence was sufficient to support an inference that the partnership agreements were drafted in 1986, Witco was not acting as a competitor of Lightning Lube's by participating in the joint venture with Avis because its only role was to finance real estate acquisitions. Thus, Witco had no duty to disclose its intent to join the venture because its contract with Lightning Lube did not prohibit Witco from providing such financing. Id. at 1188. 110 At first glance, it might seem from its discussion that the district court impermissibly weighed the evidence or passed on the credibility of Witco's witnesses in determining that Witco's evidence refuted that of Lightning Lube's. But after carefully studying the record, we conclude that the court appropriately exercised its authority. We recognize that the question before the district court in deciding the motion for judgment was not whether the evidence offered by Witco was more credible or had more weight than that offered by Lightning Lube, but whether Lightning Lube offered sufficient evidence for a reasonable jury to conclude that an Avis-Witco partnership agreement had been reached or contemplated prior to December 1986. See Fireman's Fund Ins. Co. v. Videfreeze Corp., 540 F.2d 1171, 1178 (3d Cir.1976), ([a]t least two factors are outside the perimeters of a district court's determination of a motion for judgment, the credibility of the evidence and the weight of it), cert. denied, 429 U.S. 1053, 97 S.Ct. 767, 50 L.Ed.2d 770 (1977). Thus, a trial judge, when deciding on a motion for [judgment] should not determine whether the evidence 'preponderates' but must confine himself to ascertaining whether the party against whom the motion is made adduced sufficient evidence to create a jury issue. Id. (citations omitted). 111 On the other hand, the mere fact that Lightning Lube adduced some evidence will not suffice for it to overcome the order granting judgment in Witco's favor. What the Supreme Court instructed in the analogous situation of summary judgment holds true here: [i]f the evidence is merely colorable, or is not significantly probative, the court must grant judgment to the movant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). Thus, the motion for judgment should not be granted only where there is a complete absence of probative facts to support a jury verdict. Boeing Co. v. Shipman, 411 F.2d 365, 375 (5th Cir.1969). Rather, there must be a conflict in substantial evidence to create a jury question. Id. (emphasis added). Accordingly, the trial court does not substitute its interpretation of the facts for the jury's when it determines that the record is devoid of the minimum amount of evidence from which the jury reasonably could have reached its decision. 112 In this case, we agree with the district court that the record is devoid of legally sufficient evidence that the Avis-Witco agreement was reached or contemplated prior to May 9, 1986. The fact that Golublock's notes refer to a building permit obtained the week before and that Witco produced at trial a permit dated April 1987, conclusively establish that Golublock's notes were written in 1987, not 1986. It therefore follows that the notes' references to a draft of the partnership agreement having been completed recently can signify only that the draft agreements produced by Lightning Lube were indeed written in 1987, despite the dates to the contrary on its interior pages. It is also noteworthy that the letter of intent between Avis and Witco with respect to their agreement is dated December 11, 1986. We cannot conceive that negotiating parties would first draft a contract, and then draft the letter of intent. 113 Moreover, the 1986 dates on the draft Avis partnership agreements were contradicted by the 1987 dates on some of the cover pages. In fact, a part of PX 18A is a letter, dated April 24, 1987, by Baumel that states in relevant part: I have enclosed two copies of a draft partnership agreement, reflecting additional changes received from our client yesterday. This letter thus conclusively indicates that PX 18A was drafted in April 1987. We therefore hold that no reasonable jury could have concluded that as of May 9, 1986, Witco had formed the intent to enter into the quick-lube market as a competitor of Lightning Lube. 114 In any event, even if we disagreed with the district court's assessment of the proofs, our result would not be different. Inasmuch as Lightning Lube has not pointed to any representation by Witco that it would not participate in ventures with other quick-lube franchises, it has failed to show that Witco impermissibly deceived it. Despite its protestations to the contrary, Lightning Lube complains of a nondisclosure and not an affirmative misrepresentation. 17 But where a claim for fraud is based on silence or concealment, New Jersey courts will not imply a duty to disclose, unless such disclosure is necessary to make a previous statement true or the parties share a special relationship. Berman v. Gurwicz, 189 N.J.Super. 89, 458 A.2d 1311, 1313 (Ch.Div.1981) (duty of full disclosure may arise from one party's having made partial disclosure to other or from nature of transaction and relationship between them), aff'd, 189 N.J.Super. 49, 458 A.2d 1289 (App.Div.), certif. denied, 94 N.J. 549, 468 A.2d 197 (1983); see also Jewish Ctr., 432 A.2d at 525 (where applicant for rabbinical position omitted mention of his prior criminal convictions on employment application, congregation stated proper claim of fraudulent concealment because of the unique moral and spiritual relationship between clergy and congregation); Viviano v. CBS, Inc., 597 A.2d at 548 (recovery for fraudulent concealment requires proof that defendant legally was obligated to disclose); Tele-Save Merchandising Co. v. Consumers Distrib. Co., 814 F.2d 1120, 1125 n. 2 (6th Cir.1987) (dissenting opinion) (in the absence of a fiduciary relationship, nondisclosure does not constitute fraud under New Jersey law); Restatement (Second) of Torts Sec. 551 (requiring disclosure only where defendant knows information whose nondisclosure will make earlier partial or ambiguous statement of facts to become misleading or where defendant is in a fiduciary or special relationship with plaintiff); W. Page Keeton, Prosser & Keeton On the Law of Torts Sec. 106 at 738-40 (5th Ed.1984) (same). 115 Three categories of relationships give rise to a duty to disclose: (1) fiduciary relationships, such as principal and agent, client and attorney, or beneficiary and trustee; (2) relationships where one party expressly reposits trust in another party, or else from the circumstances, such trust necessarily is implied; and (3) relationships involving transactions so intrinsically fiduciary that a degree of trust and confidence is required to protect the parties. Berman v. Gurwicz, 458 A.2d at 1313. Witco's relationship with Lightning Lube, primarily a detached business relationship, does not fall into any of these categories. Indeed, neither party challenges the district court's finding that there was not a special relationship between Witco and Lightning Lube. Moreover, Lightning Lube and Witco did not expressly agree that Witco would not participate in a competing quick-lube venture. Likewise, the agreement cannot be understood implicitly to prohibit such participation by Witco, given that the agreement merely required Witco to sell oil to Lightning Lube at a particular price; to contribute payment for joint advertising; and to lend Lightning Lube money to buy equipment. These obligations do not create a partnership or joint venture from what are essentially buyer-seller and lender-borrower relationships. Thus, we will affirm the district court's grant of judgment on the twin grounds that insufficient proof exists as to a pre-December 1986 Witco-Avis agreement and that Witco did not have an affirmative duty to disclose the existence of its Avis venture to Lightning Lube.2. Misrepresentation of Intent to Fulfill the Contract 116 The district court granted Witco judgment as a matter of law on this count because it found that there was insufficient evidence of a fraudulent intent on Witco's part at the time of contracting to support the verdict. Lightning Lube premised its fraud theory on various breaches of contract committed by Witco subsequent to the agreement. In order to be the basis for an action for fraud, however, the alleged misrepresentation cannot be predicated simply upon a promise to perform that subsequently is unfulfilled. Rather, the plaintiff must prove by a preponderance of the evidence, that at the time the promise to perform was made, the promisor did not intend to fulfill the promise. See Anderson v. Modica, 4 N.J. 383, 73 A.2d 49 (1950); Barry v. New Jersey State Highway Auth., 245 N.J.Super. 302, 585 A.2d 420, 424 (Ch.Div.1990). The mere proof of nonperformance does not prove a lack of intent to perform. Stochastic Decisions, Inc. v. DiDomenico, 236 N.J.Super. 388, 565 A.2d 1133, 1137 (App.Div.1989). 117 Lightning Lube claims that it offered evidence of more than Witco's mere nonperformance of the contract to prove Witco's fraudulent intent at the time of contracting. Most notably, Lightning Lube cites to the jury's finding that Witco misrepresented the source of oil; the proof of the Witco-Avis partnership negotiations in 1986; Witco's acts of tortious interference; and Witco's failure to keep an alleged promise that it had made Venuto to provide real estate financing to Lightning Lube franchisees. This proof, however, does not demonstrate that Witco did not have an intent to fulfill the entire contract on May 9, 1986, when Venuto reached his agreement with Witco. 118 In regard to the misrepresentation of the source of oil, while the jury found liability against Witco, it expressly refused to award compensatory damages or even nominal damages predicated on this finding. The verdict sheet contained a space for the jury to indicate if its damages for the intent not to fulfill the contract were cumulative of those awarded elsewhere. Because the jury left this space blank, we can infer that it did not base its award of $1 million for the intent not to fulfill the contract on an injury suffered to Lightning Lube as a result of the misrepresentation as to the source of oil. Accordingly, although Lightning Lube produced evidence to show that Witco did not intend to fulfill that particular portion of the contract at the time it was made, it did not establish any damages on that aspect of its case, and thus the source of oil fraud cannot sustain the $1 million dollars awarded on the intent not to fulfill the contract claim. Furthermore, the fact that Witco knew all along that it would not fulfill this discrete portion of the contract does not support an inference that Witco at the time of contracting intended to breach the entire agreement. Indeed, the evidence indicates that for the most part Witco adhered to the contract. The jury confirmed this by awarding Witco damages on its counterclaims for lack of payment by Lightning Lube for the equipment and oil supplied to it by Witco, and by finding that Witco sold it oil at the lowest available price. 119 Neither does Lightning Lube's claim of a conspiracy between Avis and Witco indicate that Witco had a fraudulent intent. As explained above, we find the proofs inadequate to demonstrate that prior to May 9, 1986, Witco and Avis had reached an agreement or contemplated their venture. But even if the evidence sufficed to place the drafting of the Avis-Witco partnership agreement as early as May 1986, the mere fact that Avis and Witco agreed to set up a venture to compete against Lightning Lube, in and of itself would not show that Witco did not intend to fulfill its contract with Lightning Lube. Witco's obligations under its agreement with Lightning Lube were not inconsistent with its obligations to the Avis joint venture. 120 Similarly, we do not find probative value with respect to the misrepresentation issue in the acts of tortious interference committed by Witco salespersons. Because these acts occurred after Witco reached its agreement with Lightning Lube, they do not establish that Witco had a fraudulent intent at the time the agreement was made. Rather, all they show is that at some subsequent point Witco employees formulated an intent to harm Lightning Lube. Furthermore, inasmuch as Witco's management personnel contracted with Lightning Lube on Witco's behalf, the fact that its lower-level employees sought to disrupt the contract does not show that the corporation did not intend to adhere to the contract. 121 Finally, Witco's failure to provide real estate financing does not evince an intent not to fulfill the contract, inasmuch as the final agreement did not obligate Witco to provide such financing. Witco made the alleged promise to Venuto prior to the point at which the parties reached their ultimate understanding. The alleged promise was retracted at the May 9, 1986 meeting, when Witco disclaimed any desire to provide real estate financing. Accordingly, we will affirm the district court's grant of judgment as a matter of law on this claim.
122 We consider next the propriety of the district court's dismissal of Lightning Lube's claims under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. Secs. 1961-1968, for failing to satisfy the statute's pleading requirements. Under 18 U.S.C. Sec. 1964(c), any person injured in its business or property by reason of a violation of section 1962 may recover treble damages and attorney's fees. In order to recover under section 1964(c) a plaintiff must plead (1) a section 1962 violation and (2) an injury to business or property by reason of such violation. Shearin v. E.F. Hutton Group, Inc., 885 F.2d 1162, 1164 (3d Cir.1989). 123 In its amended complaint and RICO Case Statement, Lightning Lube alleged that Witco violated sections 1962(a)-(d) by conspiring with Avis to steal confidential information from Lightning Lube and by misrepresenting to Lightning Lube's franchisees that Lightning Lube did not own their equipment to persuade them to leave Lightning Lube. With respect to the confidential information, Lightning Lube claims that during Venuto's negotiations with Witco, Richard Glady, Witco's Quick-Lube Director, asked him for copies of his personal financial statements, and all of Lightning Lube's Operating and Training manuals which Venuto had prepared for the franchisees. Venuto testified that if he had known that Witco was setting up a competing venture with Avis, he never would have surrendered these materials; and thus Witco obtained them through fraud. 18 124 Lightning Lube avers that the RICO enterprise is comprised of (1) the quick-lube joint venture between Avis and Witco; (2) the Avis/Kendall partnership known as K & A properties; (3) Witco and its Kendall Refinery Division; and (4) Avis. RICO Case Statement at 58-59. Lightning Lube names as the persons who violated the RICO statute: Witco, Kendall, and Avis. The purported predicate acts are mail fraud, 18 U.S.C. Sec. 1341, wire fraud, 18 U.S.C. Sec. 1343, and extortion in violation of 18 U.S.C. Sec. 1951 and N.J.Stat.Ann. Sec. 2C:20-5 (West 1982). We will address the sufficiency of Lightning Lube's allegations under each of the subsections of 1962 in turn.
125 Section 1962(a) provides in pertinent part: 126 It shall be unlawful for any person who has received any income derived, directly or indirectly, from a pattern of racketeering activity or through collection of any unlawful debt in which such person has participated as a principal within the meaning of section 2, title 18, United States Code, to use or invest, directly or indirectly, any part of such income, or the proceeds of such income, in acquisition of any interest in, or the establishment or operation of, any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce. 127 18 U.S.C. Sec. 1962(a). 128 This provision was primarily directed at halting the investment of racketeering proceeds into legitimate businesses, including the practice of money laundering. Brittingham v. Mobil Corp., 943 F.2d 297, 303 (3d Cir.1991) (quoting 11 Cong.Rec. 35,199 (1970) (remarks of Rep. St. Germain) and 116 Cong.Rec. 607 (1970) (remarks of Sen. Byrd)). Under this section, a plaintiff must allege: (1) that the defendant has received money from a pattern of racketeering activity; (2) invested that money in an enterprise; and (3) that the enterprise affected interstate commerce. Shearin, 885 F.2d at 1165. Furthermore, the plaintiff must allege an injury resulting from the investment of racketeering income distinct from an injury caused by the predicate acts themselves. Glessner v. Kenny, 952 F.2d 702, 708 (3d Cir.1991); Banks v. Wolk, 918 F.2d 418, 421 (3d Cir.1990); Rose v. Bartle, 871 F.2d 331, 357-58 (3d Cir.1989). This allegation is required because section 1962(a) is directed specifically at the use or investment of racketeering income, and requires that a plaintiff's injury be caused by the use or investment of income in the enterprise. Brittingham, 943 F.2d at 303 (emphasis added); see also Grider v. Texas Oil & Gas Corp., 868 F.2d 1147, 1149 (10th Cir.1989) (recognizing that section 1962(a) does not state that it is unlawful to receive racketeering income ... [rather] the statute prohibits a person who has received such income from using or investing it in the proscribed manner (emphasis in original)), cert. denied, 493 U.S. 820, 110 S.Ct. 76, 107 L.Ed.2d 43 (1989). 129 In this case, the RICO Case Statement alleges: 130 The enterprises, Kendall/Witco; the Avis-Kendall/Witco fast lube joint venture; K & A Properties, Inc; and the Avis defendants, have received the income derived from the pattern of racketeering activity in the instant matter. 131 The income which the enterprises have derived from their pattern of racketeering activity is the elimination of the plaintiff as a competitor in the fast lube market. Additionally, the enterprises have gained confidential and trade information possessed by the plaintiff as a fast lube franchisor that was used by the enterprises to compete directly against the plaintiff in the fast lube market. The destruction of the plaintiff as a fast lube competitor and the extraction of confidential and trade information from the plaintiff was utilized to facilitate the growth and success of the enterprises. 132 RICO Case Statement at 71-72. The district court held that these allegations did not satisfy section 1962(a)'s pleading requirements because they failed to explain how Lightning Lube was injured by the use or investment of racketeering income as opposed to the racketeering acts themselves. Instead, Lightning Lube's 1962(a) allegations merely repeat the crux of its allegations in regard to the pattern of racketeering; namely, that the defendants lied to the franchisees and stole Lightning Lube's trade secrets to eliminate Lightning Lube as a competitor. We agree with the district court's ruling in this regard. 133 According to Lightning Lube, Witco's theft of its trade secrets constitutes racketeering income and the investment of that income injured Lightning Lube because Witco used these stolen trade secrets to build a competing business which then hurt Lightning Lube's sales. In essence, then, Lightning Lube contends that the use of income--i.e., the trade secrets--stolen from Lightning Lube through fraud permitted Witco to establish its enterprise. However, we have recognized repeatedly that this type of allegation--that the use and investment of racketeering income keeps the defendant alive so that it may continue to injure plaintiff--is insufficient to meet the injury requirement of section 1962(a). In such situations, we have held that the fact that a plaintiff claims that the injury allegedly perpetrated on it would not have occurred without the investment of funds from the initial racketeering activity does not change the fact the plaintiff's alleged injury stems from the pattern of racketeering, and not from the investment of funds by the defendant. 134 For example in Brittingham v. Mobil Corp., 943 F.2d at 304-05, we affirmed the district court's dismissal of section 1962(a) claims by consumers who bought garbage bags based on misrepresentations that they were biodegradable. The complaint claimed injury from the use or investment of racketeering income because the money derived from the sale of the garbage bags permitted the enterprise to continue its operations. We held that such an allegation did not state an injury cognizable under section 1962(a); rather it merely alleged the same injury caused by the pattern of racketeering. In so holding, we stated that if the mere reinvestment of racketeering income 135 were to suffice [as an injury under section 1962(a) ], the use-or-investment injury requirement would be almost completely eviscerated when the alleged pattern of racketeering is committed on behalf of a corporation. RICO's pattern requirement generally requires long-term continuing criminal conduct. See H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229, 109 S.Ct. 2893, 106 L.Ed.2d 195 (1989). Over the long term, corporations generally reinvest their profits regardless of the source. Consequently, almost every racketeering act by a corporation will have some connection to the proceeds of a previous act. Section 1962(c) is the proper avenue to redress injuries caused by the racketeering acts themselves. If plaintiffs' reinvestment injury concept were accepted, almost every pattern of racketeering by a corporation would be actionable under Sec. 1962(a) and Sec. 1962(c) would become meaningless. 136 943 F.2d at 305. 137 Similarly, in Glessner v. Kenny, 952 F.2d at 708-10, we held that a complaint failed to state a section 1962(a) claim where the plaintiffs, a class of consumers who purchased allegedly defective residential oil furnaces from the defendant manufacturer, claimed an investment injury because the manufacturer was allowed to continue in business as a consequence of income derived from earlier frauds. Again, we found such an injury merely resulted from the reinvestment of funds obtained from the pattern of racketeering and thus more appropriately was remedied by section 1962(c), rather than section 1962(a). As we pointed out, [i]f investment injury is construed as broadly as plaintiffs suggest, the distinction between sections 1962(a) and 1962(c) would be blurred. Id. at 709; see also Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1411 (3d Cir.), cert. denied, --- U.S. ----, 111 S.Ct. 2839, 115 L.Ed.2d 1007 (1991). 138 Lightning Lube seeks to circumvent these cases by distinguishing between the reinvestment of monies obtained by fraud and the reinvestment of proprietary information obtained through misappropriation. However, we see no principled basis to draw such a distinction. In both situations, the real injury to the plaintiff is the theft of its property--whatever form it is in--and not the investment of that property in an otherwise legitimate business. 139 Therefore, we agree with the reasoning of the district court in R.E. Davis Chemical Corp. v. Nalco Chemical Co., 1991 WL 212180, at  5 (N.D.Ill. Oct. 7, 1991), which addressed the issue of whether the misappropriation of proprietary information by a competitor satisfies the investment injury requirement of section 1962(a), but reached a conclusion opposite from that suggested by Lightning Lube. The district court in R.E. Davis concluded that the actual injury of which complaint was made was the act of misappropriation, and not the use of the information by the competitor, and that, as with the taking of money through fraud, the appropriate remedy was under section 1962(c), not section 1962(a). As we agree with R.E. Davis, we will affirm the district court's dismissal of Lightning Lube's claim under section 1962(a).
Under section 1962(b), it is unlawful 140 for any person through a pattern of racketeering activity or through a collection of a unlawful debt to acquire or maintain, directly or indirectly, any interest in or control of any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce. 141 18 U.S.C. Sec. 1962(b). In order to recover under this section, a plaintiff must show injury from the defendant's acquisition or control of an interest in a RICO enterprise, in addition to injury from the predicate acts. Banks v. Wolk, 918 F.2d at 421; Helman v. Murry's Steaks, Inc., 742 F.Supp. 860, 882 (D.Del.1990); Leonard v. Shearson Lehman/American Express, Inc., 687 F.Supp. 177, 181 (E.D.Pa.1988): Such an injury may be shown, for example, where the owner of an enterprise infiltrated by the defendant as a result of racketeering activities is injured by the defendant's acquisition or control of his enterprise. Casper v. Paine Webber Group, Inc., 787 F.Supp. 1480, 1494 (D.N.J.1992). In addition, the plaintiff must establish that the interest or control of the RICO enterprise by the person is as a result of racketeering. Banks v. Wolk, 918 F.2d at 421. It is not enough for the plaintiff merely to show that a person engaged in racketeering has an otherwise legitimate interest in an enterprise. Rather, it must be established firmly that there is a nexus between the interest and the alleged racketeering activities. 142 In its RICO Case Statement, Lightning Lube alleged that Witco violated Sec. 1962(b) because: 143 [b]oth defendants Kendall/Witco and the Avis defendants maintain an interest or control in the enterprise of the Avis-Kendall/Witco fast lube joint venture. The joint venture enterprise is an enterprise that is engaged in interstate commerce through the nation-wide marketing and sale of Avis Lube fast lube franchises. Kendall/Witco provides financing and through its Kendall Refining Division, technical support to Avis Lube franchisees. The Avis defendants market and franchise Avis Lube as the franchisor.... 144 The entity 'Kendall/Witco,' under Section 1962(b), is both the liable 'enterprise' and the 'person'. Kendall/Witco is the 'person' conducting its affairs. Its employees are committing the illegal acts and those acts are for the ultimate benefit of the corporation. 145 RICO Case Statement at 72-73. 146 Noting that Lightning Lube had alleged that the corporate defendants were both persons and enterprises under section 1962(b), the district court dismissed the claim because it found it difficult to understand how a corporation can acquire or maintain an interest in itself through a pattern of racketeering activity. Opinion at 9. Thus, the district court held that section 1962(b) requires that the defendant person and enterprise be distinct entities. 147 We previously have held that the person charged with a violation of section 1962(c) must be distinct from the enterprise, Hirsch v. Enright Refining Co., 751 F.2d 628, 633-34 (3d Cir.1984), but that there is no such requirement under section 1962(a). Petro-Tech, Inc. v. Western Co. of North America, 824 F.2d 1349, 1360 (3d Cir.1987). In Genty v. Resolution Trust Corp., 937 F.2d 899, 907 (3d Cir.1991), we stated in passing that [w]here, as here, a corporate 'person' is also the 'enterprise' through which the alleged racketeering activity occurred, liability can arise only under sections 1962(a) or (b). Yet, inasmuch as the plaintiff in that case advanced claims only under sections 1962(a), (c), and (d), our reference to section 1962(b) was dicta. Thus, notwithstanding any suggestion by Genty that we are not inclined to require a distinction between the enterprise and person liable under section 1962(b), the issue still remains open in this circuit. 148 Other courts of appeal have split on this issue. The Courts of Appeal for the Seventh Circuit and Ninth Circuit have held that section 1962(b), unlike section 1962(c), permits a corporation to act as both the person liable and the alleged RICO enterprise. See, e.g., Liquid Air Corp. v. Rogers, 834 F.2d 1297, 1307 (7th Cir.1987), cert. denied, 492 U.S. 917, 109 S.Ct. 3241, 106 L.Ed.2d 588 (1989); Schreiber Distrib. v. Serv-Well Furniture Co., 806 F.2d 1393, 1397-98 (9th Cir.1986). The Court of Appeals for the Second Circuit has indicated that it is inclined to reach the opposite result. See Official Publications, Inc. v. Kable News Co., 884 F.2d 664, 668 (2d Cir.1989) (In sum, the district court was correct in dismissing outright the claims against Kable insofar as they were based on Sec. 1962(c). Although we suggest the same conclusion would follow, for similar reasons, with respect to a claim against Kable based on Sec. 1962(b), on the complaint before us, we cannot make that distinction.); see also Jacobson v. Cooper, 882 F.2d 717, 719 (2d Cir.1989) (assuming, without deciding, that enterprise and person must be separate for purposes of section 1962(b)). 149 We need not resolve this issue now, however, because even if we held that the district court erred in holding that Witco could not be both the person and enterprise under section 1962(b), 19 we would not change the district court's result as it is clear that in any case Lightning Lube has failed to state a section 1962(b) claim. We can affirm a correct decision on a ground different than that relied on by the district court. Wittekamp v. Gulf & Western, Inc., 991 F.2d at 1143. Therefore, although it was not a reason for the district court's decision, we will affirm its order granting summary judgment to Witco on the section 1962(b) claim on the basis of Lightning Lube's failure to allege how the acquisition of interest and control of the enterprise by Witco injured Lightning Lube. 150 As stated above, a well-pled complaint under section 1962(b), just as with section 1962(a), requires the assertion of an injury independent from that caused by the pattern of racketeering. Here, Lightning Lube alleges in terms of a section 1962(b) injury that the employees of Witco are engaged in a pattern of racketeering. RICO Case Statement at 73. Such an allegation clearly is insufficient because it merely parrots the same injury that section 1962(c) is meant to remedy and fails to explain what additional injury resulted from the person's interest or control of the enterprise. 151 Furthermore, Lightning Lube's RICO pleadings fail to allege a specific nexus between control of any enterprise and the alleged racketeering activity, as is required under section 1962(b). Banks v. Wolk, 918 F.2d at 421; see also Shearin v. E.F. Hutton Group, Inc., 885 F.2d at 1168 n. 2. Instead, Lightning Lube merely avers that Witco and Avis maintain an interest in themselves and the joint venture. RICO Case Statement at 73. This allegation does not explain how such an interest is the result of racketeering as opposed to an interest derived from Witco and Avis's legitimate activities, and is thus insufficient. We therefore will affirm the district court's dismissal of Lightning Lube's section 1962(b) claim.
Section 1962(c) prohibits: 152 any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt. 153 18 U.S.C. Sec. 1962(c). Just as with its pleading with respect to section 1962(b), Lightning Lube has alleged that the enterprise and the person are the same entity with respect to section 1962(c). RICO Case Statement at 62. As stated above, this court has required that the person liable be distinct from the enterprise for the purposes of recovering under section 1962(c). Hirsch v. Enright Refining Co., Inc., 751 F.2d at 633. Accordingly, the district court correctly ruled that Lightning Lube failed to satisfy section 1962(c)'s person/enterprise separateness requirement and that its claim must fail.
154 Under section 1962(d), [i]t shall be unlawful for any person to conspire to violate any of the provisions of subsections (a), (b), or (c) of this section. Any claim under section 1962(d) based on a conspiracy to violate the other subsections of section 1962 necessarily must fail if the substantive claims are themselves deficient. Leonard v. Shearson Lehman/American Express, Inc., 687 F.Supp. at 182. Inasmuch as Lightning Lube has not established a viable claim under any of those subsections, its section 1962(d) claim must also fail.C. PUNITIVE DAMAGES 155 We turn finally to the question of whether the district court properly granted judgment as a matter of law to Witco on the jury's award of punitive damages. 20 Under New Jersey law, punitive damages are available  'to punish [a defendant's] aggravated misconduct' and to deter similar misconduct in the future. Fineman, 980 F.2d at 196 (quoting Nappe v. Anschelewitz, Barr, Ansell & Bonello, 97 N.J. 37, 477 A.2d 1224, 1230 (1984) (citations omitted)). The New Jersey Supreme Court has made clear that [t]o warrant a punitive award, the defendant's conduct must have been wantonly reckless or malicious. There must be an intentional wrongdoing in the sense of an 'evil minded act' or an act accompanied by a wanton and willful disregard for the rights of another. Nappe v. Anschelewitz, 477 A.2d at 1230. Thus, something more than the mere commission of a tort is required for punitive damages, regardless of whether the tort is grounded on strict liability or fault. 21 Fineman, 980 F.2d at 196; Berg v. Reaction Motors Div., 37 N.J. 396, 181 A.2d 487, 496 (1962). Rather, only conduct which is especially egregious  will justify such an award. Fischer v. Johns-Mansville Corp., 512 A.2d at 472 (emphasis added); see also Leimgruber v. Claridge Assocs. Ltd., 73 N.J. 450, 375 A.2d 652, 654 (1977) ([p]unitive or exemplary damages are sums assessed when the wrongdoer's conduct is especially egregious); Security Alum. Window Mfg. Corp. v. Lehman Assocs. Inc., 108 N.J.Super. 137, 260 A.2d 248, 251 (App.Div.1970) (holding that punitive damages ordinarily may be awarded only  '[w]here the defendant's wrongdoing ... has the character of outrage frequently associated with crime' ) (quoting Prosser, Torts (3d ed. 1964), Sec. 2 at 9)); Restatement (Second) Torts Sec. 908, comment b (same). 156 In addition, punitive damages generally may not be assessed against a corporate employer for the wrongful acts of its employees unless someone so high in authority as to be fairly considered executive in character participated in the wrongful conduct or specifically authorized or ratified it. Wrinkler v. Hartford Accident & Indem. Co., 66 N.J.Super. 22, 168 A.2d 418, 422 (App.Div.1961); see also McAdam v. Dean Witter Reynolds, Inc., 896 F.2d 750, 768 (3d Cir.1990). The company official committing, approving or ratifying the act need not be the highest officer in the corporate hierarchy, but only must be a person of such responsibility as to arouse the 'institutional conscience.'  Doralee Estates, Inc. v. Cities Serv. Oil Co., 569 F.2d 716, 722 (2d Cir.1977); see also Viviano v. CBS, Inc., 597 A.2d at 552. 157 Witco does not dispute that if Lightning Lube established that the upper echelon management of Witco had the intent to destroy Lightning Lube or ratified a plan to accomplish that end, then a punitive award would be justified. Rather, Witco argues that there is no evidence showing that Witco's management participated in or knew of the acts of tortious interference perpetrated by its salespersons. 158 The district court agreed. In granting judgment as a matter of law, the district court found no evidence supporting Lightning Lube's allegation of a corporate strategy to put it out of business. Neither did the district court find any evidence that Witco's management authorized the misconduct by its employees that allegedly led to Lightning Lube's demise. 802 F.Supp. at 1196-97. The court found, at most, sufficient evidence to support the claim for tortious interference, specifically Corwin's attempted intimidation of three existing or potential franchisees to leave Lightning Lube, and Witco salesperson Scott Eyers' offer of free equipment to a Lightning Lube franchisee in North Carolina (Wieland incident). But the court found insufficient proof of a nexus between these activities of Witco employees and any conduct by Witco's management. Id. The court further held that even if the jury could have believed that Glady, the quick-lube national sales manager, was involved in the Wieland incident, a single tortious act is insufficient to prove management's knowledge and ratification of a sinister corporate scheme. Id. at 1197. 159 In challenging this assessment of the proofs, Lightning Lube raises more than a dozen reasons why the district court erred in finding a lack of participation or ratification by Witco's management, all of them without merit. We discuss only those contentions which require further analysis. 1. Ratification or Authorization 160 Lightning Lube first argues that top Witco management officials participated in the wrongdoing by knowledgeable inaction because they had seen memoranda indicating that Witco salespersons were interfering tortiously with Lightning Lube's businesses, but did nothing to stop this activity. See Miller v. Apartments & Homes of N.J., Inc., 646 F.2d 101, 111 (3d Cir.1981) (employer liable for punitive damages for the conduct of his agent when the record shows that he was, 'by action or knowledgeable inaction, involved in the wrongdoing'  (citation omitted)). In this regard, Lightning Lube points to a memorandum that Corwin wrote to Witco's management suggesting that Witco confiscate Lightning Lube's equipment to ensure that its franchisees use Kendall oil. We, however, do not find this document probative of ratification or authorization, inasmuch as there is no evidence that anyone at Witco acted upon the memorandum. Lightning Lube does not dispute that Corwin committed no tortious acts after he sent this memorandum in August 1987. Therefore, even if the memorandum had put Witco on notice of Corwin's activities, there was no subsequent wrongdoing that Witco could have authorized or ratified. Moreover, the memorandum in and of itself did not put Witco on notice of any past wrongdoing on Corwin's part. Similarly, although Lightning Lube argues that Corwin testified that he kept executives abreast of his actions, and therefore by implication of his misconduct, each and every day, the weekly sales reports to which Corwin referred and that Lightning Lube cites, do not mention his allegedly tortious contacts. 161 Next, Lightning Lube notes that in February 1987 Venuto began discussions with Valvoline, with the intent that Valvoline would lend money to him to pay off Witco for the equipment loan, but that these discussions ended after Corwin wrote a memorandum to Glady, stating that he intended to talk to Valvoline to tell them that Witco owned Venuto's equipment. Lightning Lube would have us assume, based on this memorandum, that Corwin wrongfully persuaded Valvoline to terminate negotiations and that Witco's management ratified this conduct when it read his memorandum and did nothing to stop him. But, again, Lightning Lube adduced no proof showing that Corwin actually did the act he discussed in the memorandum. Likewise, no evidence links Valvoline's raising questions about the payback schedule with any Witco activity approved or ratified by Witco's management. 162 Finally, Lightning Lube places great significance on the purported fact that no equipment could be offered, let alone provided, to Lightning Lube franchisees without the authorization of top Witco officials. From this premise Lightning Lube assumes that management must have known of Corwin's offers of free equipment to the franchisees. We disagree. The mere fact that management approved the installation of equipment at sites of former Lightning Lube franchisees does not establish that management knew or authorized that equipment was offered as an inducement to terminate a Lightning Lube franchise. 2. Payback Schedule 163 Lightning Lube argues that the denial of the payback schedule justifies a punitive award because it constituted a deliberate attempt by Witco's management to disrupt Lightning Lube's relations with its franchisees. However, the record does not support the conclusion that the Witco management deliberately deprived Lightning Lube of the schedule to destroy it. Documents obtained from Witco which showed that Glady repeatedly implored the credit department to send Venuto the schedule belie Lightning Lube's contention in this regard. The delayed delivery of the payback schedule thus amounted to only a breach of contract. 164 Under New Jersey law breaches of contract, even if intentionally committed, do not warrant an award of punitive damages in the absence of a showing that defendant also breached a duty independent of that created by the contract. See, e.g., W.A. Wright, Inc. v. KDI Sylvan Pools, Inc., 746 F.2d 215, 217 (3d Cir.1984) ( '[p]unitive damages are not recoverable for a breach of contract unless the conduct constituting the breach is also a tort for which punitive damages are recoverable'  (quoting Restatement (Second) of Contracts Sec. 355 (1979))); Pickett v. Lloyd's, 131 N.J. 457, 621 A.2d 445, 455 (1993) (permitting insured to recover punitive damages in context of insurer's breach of policy agreement where insurer also committed separate and intentional tort of refusing in bad faith to pay claim); Sandler v. Lawn-A-Mat Chem. & Equip. Corp., 358 A.2d at 812 (punitive damages may be awarded only where breaching party shares fiduciary relationship with plaintiff). There may be such an independent breach if the defendant commits a tort or violates a special relationship of trust between the parties; in which case it is the commission of the tort or the breach of trust, rather than the breach of the contract, which gives rise to an award of punitive damages. W.A. Wright, 746 F.2d at 217. As we explained above, the agreement between Witco and Lightning Lube did not create a fiduciary relationship between them. Therefore, without sufficient proof that Witco's withholding of the payment schedule was deliberate, let alone the product of an evil minded intent to harm Lightning Lube, Witco's failure to deliver it on time cannot support an award of punitive damages. 3. Cover-Up 165 Lightning Lube also argues that Witco's management embarked on a corporate campaign of intentional deceit that independently warranted an award of punitive damages. In this regard, Lightning Lube claims that Witco's witnesses lied at trial, thus signifying that Witco attempted to cover up its intentional deceit with regard to the payback schedule. The evidence, however, simply does not support this conclusion. Lightning Lube does not point to any fabricated evidence introduced by Witco. The mere fact that the jury disbelieved Witco's witnesses or that their testimony at times contradicted the documentary evidence does not show that Witco engaged in a scheme of deception. 4. Witco-Avis Venture 166 Lightning Lube next points to Witco's agreement with Avis to start the joint venture as proof of its evil-minded intent. Yet, there is no showing of a nexus between Witco's participation in the venture and the acts of Witco salespersons in tortiously interfering with Lightning Lube's agreements with its franchisees. Thus, these incidents cannot be linked so that an inference may be drawn from them that Witco's management intended to destroy Lightning Lube. In reaching our conclusion we recognize that direct proof, such as that of an executive's signature, is often unavailable to demonstrate corporate complicity. But, although direct evidence or circumstantial evidence of the smoking gun variety is not required to award punitive damages, a plaintiff must show something more than the fact that the company would have benefitted economically from harm done to its rival and that there were acts of tortious interference by lower-level employees. Employees, after all, without encouragement of management may believe that hurting their competitor ultimately would benefit them. Thus, some link must be shown between the possible economic motive of management and the tortious acts to establish a malicious intent on the part of the company. Based on the evidence adduced at trial, we see no such link.
167 Lightning Lube claims that the credit hold in December 1986 and equipment cutoff January 1987 were improper and demonstrate Witco's wrongful motives. However, Lightning Lube ignores the jury's determination that Lightning Lube owed money to Witco. Moreover, we find, based on the record, that Witco acted within its rights in imposing a credit hold on an account on which Lightning Lube was more than 90 days delinquent and in freezing its delivery of equipment. The evidence does not support Lightning Lube's argument that Witco's executives should not have approved the hold because they had received previous information that Lube was current in its bills. Lightning Lube Br. at 14. According to the evidence, Witco's management received information that Lightning Lube's payments were current as of September 1986; but the credit hold was imposed in December 1986, when Lightning Lube was again in arrears. Similarly, no evidence supports Lightning Lube's charge that Witco improperly demanded full repayment of the 5-year equipment loan before it was due. Rather, the record indicates only that Witco would not sell Lightning Lube additional equipment under their agreement. Witco had the right to insist that Lightning Lube pay for its equipment before Witco sold it new equipment, inasmuch as Witco had no obligation to sell Lightning Lube additional equipment.
168 Lightning Lube argues that Witco's fraud in regard to the source of oil warrants an inference of corporate intent. Yet, as we explained above, despite the fact that the jury found that Lightning Lube had proven all of the elements of a claim of misrepresentation as to the source of oil, the jury also found that Lightning Lube sustained no damages on this claim. Furthermore, the jury did not award Lightning Lube nominal damages on this claim. Although an award of compensatory damages is not a prerequisite for a punitive award, see Nappe v. Anschelewitz, 477 A.2d at 1233, at least some injury, loss, or detriment to the plaintiff must occur to warrant punitive damages. Id. at 1229; see also O'Connor v. Harms, 111 N.J.Super. 22, 266 A.2d 605 (App.Div.), certif. denied, 57 N.J. 137, 270 A.2d 40 (1970) (striking down punitive damages award because no nominal damages were awarded). Inasmuch as the jury did not find sufficient injury to award nominal damages on this claim, the source of oil fraud cannot sustain an award of punitive damages. 169 Lightning Lube challenges this conclusion by arguing that the jury instructions did not include an explicit provision for an award of nominal damages. It argues that a rational jury, acting under the trial court's instructions, could have determined that, although the interrogatories contained no space in which nominal damages could be written, the jury nonetheless was authorized to proceed in imposing punitive damages as if nominal damages had been awarded on the source of oil claim. Lightning Lube therefore invites us to assume that the jury awarded nominal damages. We decline to accept this invitation. Given the court's instructions to the jury and the wording of the interrogatories, we are satisfied that the jury knew to award nominal damages expressly if it desired to do so. 22 7. Glady's Activities 170 Lightning Lube also argues that Glady's participation in the Wieland incident was not his only tortious act. After closely studying the record, we reject this assertion. Lightning Lube cites to a memorandum written by Glady in January 1987 ordering Witco salespersons to contact Lightning Lube franchisees directly with respect to the sale of oil products. In Lightning Lube's view, this order was tortious because it signified an attempt to circumvent Venuto. We conclude that inasmuch as this memorandum was connected with the credit hold, a jury could not find that Glady acted improperly. Nor, as we explained above, could the jury have believed reasonably that Witco instituted the credit hold for pretextual reasons to justify selling oil directly to the franchisees. 171 Similarly, we agree with the district court's conclusion that Glady's activities in connection with the Wieland incident cannot sustain an award of punitive damages. In this regard, Witco argues that Glady's conduct was free of culpable intent, and even if it was not, Glady was not an executive at the time. We do not address either Glady's status in the Witco hierarchy or the district court's reasoning, that a single tortious act by Glady could not give rise to an award of punitive damages for a wide-ranging corporate scheme, inasmuch as we agree with Witco's first argument. Based on the record, we see no evidence showing that Glady intentionally ratified Eyers's offer of free equipment to Wieland. On the contrary, a memorandum by Glady to his superiors indicates that he withdrew the offer and explained to Wieland that Witco had a special arrangement with Lightning Lube in regard to its equipment. Lightning Lube raises the possibility that Glady lied in the memorandum to give his superiors cover, but the mere fact the jury could disbelieve the contents of the memorandum does not substitute for proof that Glady intentionally sought to interfere with Lightning Lube's relations with Wieland. 8. Counterclaim 172 Finally, Lightning Lube argues that Witco's filing of a counterclaim, which the district court partially dismissed on April 20, 1992, justifies a punitive award because it constituted an intentional corporate decision by Witco to injure Lightning Lube through the making of false allegations. The counterclaim to the extent dismissed and germane here accused Lightning Lube of defrauding its franchisees by overcharging them for oil it had purchased from Witco. Lightning Lube argues, however, that Witco filed the claim knowing it was not true and that it would have a devastating effect on Lightning Lube, because Lightning Lube would be required to disclose Witco's charges to existing and prospective franchisees. Venuto testified that the disclosure of this counterclaim completely stopped all sales of new franchises and was Lightning Lube's death blow. Lightning Lube Br. at 9. In order to show that Witco filed the counterclaim solely to destroy Lightning Lube's relations with its franchisees, Venuto and Kleger testified that Witco's attorneys threatened to bury Lightning Lube when it filed suit against Witco and, upon filing the counterclaim said, you can't sell no [sic] franchises now, can you Ralph? In granting Witco's posttrial motions, the district court ruled that it had erred in admitting evidence of these statements. 173 Witco advances two arguments as to why the counterclaim and the alleged statements by Witco counsel do not warrant a punitive award. First, Witco argues that the district court's denial of two Rule 11 motions against Witco and Witco's counsel, based on the counterclaim, bars the jury from inferring any malice in determining punitive damages. We summarily reject this contention. Inasmuch as the denial of a Rule 11 motion does not foreclose the assertion of a subsequent malicious prosecution suit, see Cohen v. Lupo, 927 F.2d 363, 365 (8th Cir.1991), cert. denied, --- U.S. ----, 112 S.Ct. 180, 116 L.Ed.2d 142 (1991) (grant of Rule 11 motion not res judicata with respect to state claim of malicious prosecution); Amwest Mortgage Corp. v. Grady, 925 F.2d 1162, 1165 (9th Cir.1991) (denial of Rule 11 motion will not support federal court's enjoining state malicious prosecution proceeding), neither should it automatically prevent an award of punitive damages predicated on conduct of which the moving party on the Rule 11 motion complained. Where, as here, the Rule 11 proceedings were limited in scope and did not constitute a full and fair litigation of the issues presented to the jury, it would be inappropriate to use such collateral proceedings to re-examine the jury's finding of malice. [T]he court cannot consistent with the Seventh Amendment, evaluate a jury's verdict based on evidence that the jury was not permitted to consider at trial or on a legal standard not given to the jury. Mattison v. Dallas Carrier Corp., 947 F.2d 95, 108 (4th Cir.1991). 174 Witco's second argument is that under New Jersey law evidence of an allegedly false judicial pleading is inadmissible to establish willfulness for purposes of tortious interference in a subsequent judicial proceeding. See Rainier's Dairies v. Raritan Valley Farms, Inc., 19 N.J. 552, 117 A.2d 889 (1955) (allegations made in judicial proceeding cannot form predicate for action in defamation or tortious interference because such allegations are absolutely privileged). Thus, Witco maintains that the counterclaim is absolutely privileged and cannot be used as evidence of corporate malice. However, we agree with Lightning Lube that if such a privilege existed in the circumstances of this case, Witco has waived it. Although Witco objected to the introduction of evidence of the statements by its attorneys, it never objected to testimony regarding the counterclaim itself. Furthermore, Witco did not assert the claim of privilege as an affirmative defense in its answer or joint pretrial order. 175 Even if admissible, however, we find that, viewed in the light most favorable to Lightning Lube, the evidence of Witco's counterclaim, when considered separately from the attorney's statements, cannot sustain an award of punitive damages. Lightning Lube's accusations in regard to the counterclaim are analogous to the tort of wrongful use of civil proceedings, more commonly known as malicious prosecution. Under New Jersey law, a plaintiff asserting a claim of malicious prosecution must prove that the defendant (1) instituted proceedings (2) without probable cause and (3) with legal malice and (4) that the proceedings terminated in favor of the plaintiff. See Westhoff v. Kerr Steamship Co, 219 N.J.Super. 316, 530 A.2d 352 (App.Div.1987). Legal malice is defined as either knowingly acting without probable cause--i.e., a reasonable belief--or primarily for a purpose other than securing the proper adjudication of the claim in which the proceedings are based. Thus, even if the allegations contained in Witco's counterclaim turned out to be false, so long as its assertion of the counterclaim was not malicious and without probable cause, there is no cause of action for malicious prosecution. Furthermore, the instigator of a civil suit may rely on facts which it reasonably might be expected that subsequent pretrial discovery would adduce. Westhoff, 530 A.2d at 355. This is because 176 obviously less in the way of grounds for belief will be required to justify a reasonable man in bringing a civil rather than a criminal suit. Sometimes this is expressed by saying that want of probable cause must be 'very clearly proven' or 'very palpable,' or that 'greater latitude' must be allowed than in a criminal case. Apparently what is meant is merely that the instigator need not have the same degree of certainty as to the facts, or even the same belief in the soundness of his case, and that he is justified in bringing a civil suit when he reasonably believes that he has a good chance of establishing it to the satisfaction of the court or the jury. 177 Id. (quoting Prosser and Keeton on the Law of Torts Sec. 120, at 843 (5th Ed.1984)). Applying this standard to the present case, and disregarding the statements of Witco's attorneys to Kleger and Venuto, the evidence in this case simply does not establish that, at the time it asserted the counterclaim, Witco acted without probable cause or with an improper purpose, let alone with the egregious motive necessary to warrant a punitive award. 23 178 Having determined that the remaining evidence concerning the counterclaim does not provide an adequate basis for a claim of malicious prosecution 24 and thus cannot standing alone be the predicate for punitive damages here, we next address whether the district court improperly admitted the evidence of the attorneys' statements, and, if so, whether we still must consider this evidence in determining the sufficiency of the proofs with respect to Witco's state of mind in filing the counterclaim. In considering Witco's posttrial motions, the district court ruled that it erred in admitting the extra-judicial statements by Witco's lawyers against Witco as admissions under Fed.R.Evid. 801(d)(2)(C). We agree. Rule 801(d)(2)(C) specifically excludes from the definition of hearsay any statements used against a party which were made by another person authorized by the party to make a statement concerning the subject. Courts have applied this rule to admit evidence of statements made by attorneys in a representational capacity. Hanson v. Waller, 888 F.2d 806, 814 (11th Cir.1989). 179 But not every out-of-court statement by an attorney constitutes an admission which may be used against his or her client. Rather, an attorney has authority to bind the client only with respect to statements directly related to the management of the litigation. United States v. Dolleris, 408 F.2d 918, 921 (6th Cir.1969) ([a]n attorney, merely because of his employment in connection with litigation, does not have the authority to make out-of-court admissions for his client, except those which are directly related to the management of that litigation.), cert. denied, 395 U.S. 943, 89 S.Ct. 2014, 23 L.Ed.2d 461 (1969). Thus, courts generally measure the authority of the attorney to make out-of-court admissions by the same tests of express or implied authority as would be applied to other agents. John W. Strong, 2 McCormick on Evidence Sec. 259, at 163 (4th Ed.1992). Here, no evidence shows that the statements of Witco's attorneys were related to the management of the litigation or that Witco otherwise authorized its attorneys to make these statements. The district court, therefore, should not have admitted these statements. 180 During oral argument, Lightning Lube suggested that if we determined that the district court improperly admitted evidence in connection with the counterclaim, such a determination could lead at most to a remand for a new trial on punitive damages, but not the affirmance of the district court's grant of judgment on that claim. Lightning Lube makes this contention because in its view neither the district court nor the appellate court when considering a motion for judgment as a matter of law, may ignore evidence later found to have been admitted erroneously, but instead must consider all the evidence submitted to the jury. 181 This argument is directly contrary to Lippay v. Christos, 996 F.2d 1490, 1501 (3d Cir.1993). In that case, after holding that the district court erroneously had admitted hearsay evidence, we vacated the district court's order denying the defendant's motion for judgment as a matter of law and remanded the case to the district court to reconsider the motion without the inadmissible evidence. 25 Remarkably, just as in this case, the inadmissible evidence in Lippay was a statement by a purported agent of the defendant that was used improperly against the defendant as a vicarious admission to demonstrate malice. While Lightning Lube argues against the result in Lippay, which it dismissed at oral argument as being an almost inadvertent holding, Lippay is binding on this panel. 182 In fact, there was nothing startling in Lippay because dicta in Aloe Coal Co. v. Clark Equip. Co., 816 F.2d 110, 115-16 (3d Cir.), cert. denied, 484 U.S. 853, 108 S.Ct. 156, 98 L.Ed.2d 111 (1987), foreshadowed its holding. In Aloe we found unpersuasive cases from outside this circuit holding that a district court cannot grant judgment as a matter of law without consideration of evidence it wrongly had admitted. It is true that over 50 years ago, the Supreme Court suggested in dicta that assertions that the district court erred in admitting or excluding evidence should not be considered in a motion for judgment. See Montgomery Ward & Co. v. Duncan, 311 U.S. 243, 249, 61 S.Ct. 189, 194, 85 L.Ed. 147 (1940). But to our knowledge the Supreme Court never has addressed directly the issue of whether a trial court, in reviewing the sufficiency of the evidence with respect to a motion for judgment, must take the record as presented to the jury and thus cannot enter judgment on a record altered by the elimination of inadmissible evidence. 26 See Aloe, 816 F.2d at 115 (stating that this issue is unresolved). 183 We also recognize that other courts of appeals that have ruled on the issue and have determined that the district court should not review a truncated record, see, e.g., Jackson v. Pleasant Grove Health Care Ctr., 980 F.2d 692, 695 (11th Cir.1993); Douglass v. Eaton Corp., 956 F.2d 1339, 1343 (6th Cir.1992), have cited the nonmovant's reliance interest as their rationale. According to these courts, if evidence is ruled inadmissible during the course of the trial, the plaintiff has the opportunity to introduce new evidence. Jackson v. Pleasant Grove, 980 F.2d at 696. But, when that evidence is ruled inadmissible in the context of deciding a motion for [judgment as a matter of law], the plaintiff, having relied on the evidence already introduced is unable to remedy the situation. Id. Yet, as we pointed out in Aloe, this explanation of course does not address either the competing reliance of the defendant, or the homespun axioms that a litigant is entitled to only one bite of the apple or to only three strikes at bat. 816 F.2d at 116. Further, we find no reason to suppose that a litigant would hold back significant evidence at trial. 27 Indeed, Lightning Lube has not pointed to any additional evidence of the culpability of Witco's management that it withheld at trial, but would have introduced had it known that the court ultimately would rule evidence of the attorneys' state of mind concerning the counterclaim to be inadmissible. 184 We recognize that the rule enunciated in Lippay could lead to an unjust result where a litigant actually tendered additional evidence which the district court excluded on the ground that it was cumulative. In that situation it would be unfair, in determining a posttrial motion for judgment, for a court to disregard the erroneously admitted evidence if the excluded evidence could have substituted for it. Thus, in such a case, which was not the situation in Lippay, fairness would dictate that the district court consider the entire trial record in ruling on a motion for judgment. But Witco has not suggested that the district court excluded, as cumulative, evidence of the same character as that of the counterclaim. 185 In light of our precedent in Lippay, we hold that we may not consider the inadmissible evidence of the lawyers' statements in reviewing the sufficiency of the evidence sustaining the punitive award. Given this determination, and the insufficiency of the remaining evidence of malice in connection with the counterclaim, we further conclude that the counterclaim cannot support an award of punitive damages. 186 In sum, viewed in the light most favorable to Lightning Lube, the admissible evidence presented cannot support a finding of evil-minded motives or a willful disregard of Lightning Lube's rights on the part of Witco's management. We recognize that, in certain circumstances, a jury properly may infer malice from the sum of the acts proved, even where no individual act could support such an award. See, e.g., Viviano v. CBS, Inc., 597 A.2d at 552. In this case, however, no jury could infer that the wrongful acts, whether considered separately or cumulatively, were authorized or ratified by the corporation. The record is devoid of evidence showing the existence of a plot. Lightning Lube's attempt to create a wide-ranging corporate scheme out of isolated events rests on speculation only. We therefore will affirm the district court's grant of judgment as a matter of law on this claim.