Court Opinion

ID: 1021201
Source: CourtListenerOpinion
Date Created: 2013-07-04 23:02:50.759893+00
Date Added: 2024-06-11T09:57:32.662075
License: Public Domain

UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT

                               No. 05-2138

SOUTHPRINT, INCORPORATED, d/b/a Checkered Flag
Sports,

                                                 Plaintiff - Appellant,

           versus

H3, INCORPORATED,

                                                  Defendant - Appellee.

Appeal from the United States District Court for the Western
District of Virginia, at Danville. Norman K. Moon, District Judge.
(CA-02-38-4)

Argued:   September 20, 2006                 Decided:   December 7, 2006

Before MOTZ and GREGORY, Circuit Judges, and Richard L. VOORHEES,
United States District Judge for the Western District of North
Carolina, sitting by designation.

Affirmed by unpublished opinion. Judge Gregory wrote the opinion,
in which Judge Motz and Judge Voorhees joined.

ARGUED: Harold David Gibson, GENTRY, LOCKE, RAKES & MOORE, Roanoke,
Virginia, for Appellant. Luke Anderson, MERCHANT & GOULD, L.L.C.,
Atlanta, Georgia, for Appellee. ON BRIEF: William R. Rakes, Monica
Taylor Monday, GENTRY, LOCKE, RAKES & MOORE, Roanoke, Virginia, for
Appellant. Brian C. Riopelle, Kristen M. Calleja, MCGUIREWOODS,
L.L.P., Richmond, Virginia, for Appellee.
Unpublished opinions are not binding precedent in this circuit.

                                2
GREGORY, Circuit Judge:

       Southprint,      Inc.   ("Southprint")        appeals       the   dismissal   on

motion for summary judgment of its state-law causes of action

against H3, Inc. ("H3"). Because we agree with the district court

that H3 is entitled to judgment as a matter of law, we affirm.

                                          I.

       In August of 2001, the prominent national auto retailer

AutoZone   began     contemplating        a    chain-wide     program      that    would

promote hats bearing Ford, Chevy, and Dodge logos in its stores.

Only H3 and Southprint (doing business as Checkered Flag Sports)

were considered as possible vendors for the program. In the early

months   of    2002,    both   vendors        participated        in   extensive    test

programs with AutoZone, designed to ascertain which vendor would

best   serve    AutoZone's       needs.       On   April    18,    2002,   Southprint

submitted a bid to AutoZone for the Ford, Chevy, and Dodge program.

H3 submitted its quote eleven days later on April 29.

       Earlier,    on    March    23,     2002,      Raul    Alvarez,      acting    on

Southprint's behalf, wrote to DADA Corp. ("DADA"), hat manufacturer

for both Southprint and H3, to ask for price quotes on hats DADA

made exclusively for H3. H3 supplied the hats to its client, Roush

Racing ("Roush"). E-mails Alvarez sent two and three days later

indicate that he received the pricing information from DADA and

                                          3
that    Southprint   was,   at    that       time,    considering      using   that

information to capture Roush's business.

       According to the uncontested affidavit of H3 president Scott

Hines, on April 2, 2002, H3 asked DADA to enter into an exclusive

relationship with H3 in order to protect H3's pricing information

and hat designs, as well as to ensure a consistent source of hats.

Alvarez recalled speaking with Stephen Park of DADA in March or

April of 2002 about DADA's plans to cease doing business with

Southprint. On April 17, DADA released a letter announcing that it

had entered into an exclusive deal with H3. The letter stated that

DADA would manufacture Ford, Chevy, and Dodge headwear only for H3

and that DADA would not accept any orders for these types of caps

from other customers as of the date of the letter.

       On May 9, 2002, Alvarez received an e-mail from Park of DADA

saying that the following day Checkered Flag Sports should begin

working with a company called Trademax instead of DADA. In his

response to the e-mail, Alvarez asked Park twenty-four questions

about Trademax and the prospective shift in manufacturers. Alvarez

relied   upon   Park's   answers    to       those    questions     and   a    phone

conversation he had with Park when assuring Southpoint executives

that   Trademax   was    wholly   owned       by     DADA's   owners    and    would

manufacture caps to DADA standards.

       At roughly the same time, representatives of AutoZone called

Southprint and H3 to inform them that AutoZone intended to give

                                         4
Southprint     the        chain-wide    contract.1           Todd    Hammett,     a

manufacturer's       sales     representative        hired      to   co-represent

Southprint to AutoZone, answered one such call from AutoZone on

Southprint’s behalf. Hammett stated that he did not consider the

AutoZone call to be a commitment from AutoZone, although he did

believe that Southprint would ultimately get AutoZone's business.

     After receiving a similar call from AutoZone, Michael McGhee

of   H3     began    to     make   phone     calls      to   various     AutoZone

representatives.      Testimony       regarding   the   precise      substance   of

McGhee's calls varies, but recipients of McGhee’s calls testified

that McGhee asked many questions about Southprint's financial

stability, licensing agreements, and manufacturing capability.

According    to     the    AutoZone    representatives       deposed,    McGhee’s

questions were standard ones typically raised by vendors in such

circumstances. The Monday following AutoZone's calls to Southprint

and H3, Marilyn Hurst of AutoZone was asked by her superiors to

give Southprint and H3 another chance at the chain-wide contract.

Although    AutoZone      representatives    never      fully   explained   their

decision to reconsider the vendor for the Ford, Chevy, and Dodge

program, the AutoZone buyers testified that McGhee's calls did not

affect their decision.

     1
      Both parties give May 10, 2002 as the date of these calls,
but neither cites any spot in the record that pinpoints this date
as the crucial one. The relevant witnesses remember the call being
made on a Friday in May, but not on the tenth specifically.

                                         5
     On May 14 and 15, Southprint placed orders for hats with DADA,

ostensibly in reliance upon the call from AutoZone. At some point

on the fifteenth, Hurst contacted Hammett with inquiries arising

from McGhee's calls. By that date, AutoZone had received a second

bid from H3, a bid that would be parried by Southprint's second

bid on May 30. The day after Southprint submitted its second bid,

AutoZone   notified   the   company       that   it   had   been   selected   as

AutoZone's   chain-wide     vendor   for    the    Ford,    Chevy,   and   Dodge

program.

     On July 15, 2002, Southprint filed suit against H3 in the

United States District Court for the Western District of Virginia.

Southprint raised a claim under Section 43(a) of the Lanham Act and

three Virginia state-law claims: business defamation, tortious

interference with a contract, and tortious interference with a

business   expectancy.    In   response     to    H3's   motion    for   summary

judgment, the district court dismissed all Southprint's claims on

September 8, 2005. Southprint now appeals the dismissal of its

tortious interference and defamation claims.

                                     II.

     This Court reviews a decision granting or denying a motion for

summary judgment de novo. See Shaw v. Stroud, 13 F.3d 791, 798 (4th

Cir. 1994). Rule 56(c) of the Federal Rules of Civil Procedure

states that summary judgment shall be granted when "there is no

                                      6
genuine issue as to any material fact and [ ] the moving party is

entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c).

The substantive law identifies which facts are material, and

"[o]nly disputes over facts that might affect the outcome of the

suit under the governing law will properly preclude the entry of

summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242,

248 (1986). To be genuine, the dispute must be over evidence that

would allow a reasonable jury to return a verdict for the nonmoving

party. See id. To prevail, the nonmoving party may not rest upon

the "mere allegations or denials of his pleading, but . . . must

set forth specific facts showing that there is a genuine issue for

trial." Id. (quoting First Nat’l Bank of Ariz. v. Cities Serv. Co.,

391 U.S. 253 (1968)).

                                     III.

                                      A.

     Southprint first appeals the district court's dismissal of its

claim of tortious interference with Southprint's DADA purchase

orders. Southprint contends that H3 interfered with two purchase

orders, placed by Southprint with DADA on May 14 and 15, 2002, "by

demanding     that   DADA   stop     producing     hats   for     Southprint."

(Appellant's Br. 27.) When H3 asked DADA to enter into an exclusive

production arrangement in April of 2002, however, the purchase

orders   in   question   had   not   yet    been   placed.   H3    could   not,

                                      7
therefore, have tortiously interfered with the Southprint/DADA

contracts by asking DADA to enter into an exclusive manufacturing

agreement.

     To support a claim for tortious interference with a contract

or business expectancy in Virginia, a plaintiff must show

     (1) the existence of a valid contractual relationship or
     business expectancy; (2) knowledge of the relationship or
     expectancy on the part of the interferor; (3) intentional
     interference inducing or causing a breach or termination
     of the relationship or expectancy; and (4) resultant
     damage to the party whose relationship or expectancy has
     been disrupted.

Duggin v. Adams, 360 S.E.2d 832, 835 (Va. 1987) (quoting Chaves v.

Johnson, 335 S.E.2d 97, 102 (Va. 1985)). Southprint's DADA purchase

orders are dated May 14 and 15, 2002. DADA agreed to H3's proposal

of an exclusive relationship no later than April 17, 2002. As the

timing makes clear, H3's formation of an exclusive relationship

with DADA cannot form the basis of a tortious interference claim

because   at   the   time   H3   entered   into   the   relationship,   the

contractual relationship between Southprint and DADA in question

(the purchase orders) did not yet exist.

     Southprint also seems to argue that a May 22, 2002, e-mail

from Scott Hines of H3 to Park of DADA constituted the tortious

interference of which Southprint complains. In that e-mail, Hines

reiterated H3's desire to maintain an exclusive relationship with

DADA and its intent to take its business elsewhere if DADA did not

respect that relationship. Hines also wrote: “DADA is not obligated

                                     8
to accept orders or produce for any customers. Even if you chose

not to produce for H3 then there would be nothing we could do about

it. We cannot force you to do business with us or can [sic] anyone

else.” (J.A. 66.) Hines did not, however, give any indication that

he was aware of any existing contractual relationships between DADA

and Southprint with which he and H3 might interfere.

       Southprint contends that an e-mail from DADA to H3 sent the

day before Hines’s communication proves that H3 was aware of the

purchase orders. That e-mail mentions existing orders only once, in

the    following    fashion:       "Even    for   alraedy       [sic]    placed

order(Ford,Chevy [sic] & Dodge),please [sic] kindly switch ..t

[sic] to the substitutive [sic] company." (J.A. 262.) This sentence

hardly gives H3 notice of an existing contractual relationship

between DADA and Southprint. Although it may have notified H3 that

Southprint had submitted an order to DADA, it certainly did not

advise H3 that two purchase orders existed and had been agreed to

by    both   companies.   Without   knowledge     of   the   existence    of   a

contractual relationship with which to interfere, H3 could not have

tortiously interfered with a contract. See Duggin, 360 S.E.2d at

835. The district court's dismissal of Southprint's claim of

tortious     interference   with    the    purchase    orders   is   therefore

affirmed.

                                      9
                                      B.

       Southprint next argues that H3 tortiously interfered with a

business expectancy between Southprint and DADA by pressuring DADA

into an exclusive relationship with H3. According to Southprint,

H3's    April   2002   ultimatum    to     DADA—enter    into    an    exclusive

manufacturing     relationship      with    H3   or     lose    H3's   sizeable

business—was    improper   and     actionable    under    Virginia     law.   But

Southprint presents no evidence tending to establish a business

expectancy between Southprint and DADA in April 2002. Consequently,

its claim of tortious interference with that business expectancy

fails.

       To prove the existence of a business expectancy, a party must

demonstrate an objective expectation of future business; “mere

proof of a plaintiff’s belief and hope that a business relationship

will continue is inadequate to sustain the cause of action.”

Commercial Bus. Sys., Inc. v. Halifax Corp., 484 S.E.2d 892, 301

(Va. 1997). The plaintiff must establish “a probability of future

economic benefit, not a mere possibility.” Id. Southprint has not

met this burden.

       Southprint had done business with DADA in the past and did so

again after April 2002. In April 2002, however, Southprint did not

have reason to believe it had won the AutoZone contract, so it had

no objectively reasonable ground to expect imminent, AutoZone-

related business with DADA. Cf. RFE Indus., Inc. v. SPM Corp., 105

                                      10
F.3d 923, 927 (4th Cir. 1997) (finding no valid business expectancy

under Virginia law where a supplier’s customers purchased goods on

an “as needed” basis with no commitment to future purchases).

Southprint did not even submit its bid to AutoZone until April 18,

the day after DADA released a letter announcing its new, exclusive

arrangement with H3. Indeed, Alvarez acknowledged that he had heard

from DADA of its exclusive deal with H3 "long before [the] May 10

date"   on   which   AutoZone     representatives      ostensibly     called

Southprint   to   notify   the   company   it   had   won   the   chain-wide

contract. (J.A. 499.) Similarly, Southprint presents no evidence

that in April 2002 it was likely to secure Roush’s business and

rely upon DADA to meet Roush’s demand. Without an existing business

expectancy with which to interfere, H3 could not have committed

tortious interference by asking DADA to enter into an exclusive

relationship. See Duggin, 360 S.E.2d at 835. The dismissal of this

claim is affirmed.

                                    C.

     Southprint also appeals the district court's dismissal of

Southprint's claim alleging tortious interference with its business

expectancy with AutoZone. H3 concedes the existence of a business

expectancy between Southprint and AutoZone arising May 10, 2002,

and there is no dispute that H3 knew of that expectancy as of the

                                    11
Friday    in     May   on   which   it   arose.      But   Southprint’s   business

expectancy did not evaporate; it was realized.

       On May 31, 2002, one day after receiving Southprint’s revised

bid,     AutoZone      awarded      Southprint       the   chain-wide     contract.

Southprint claims to have been damaged to the extent that its

second bid was lower than its first, but never explains why its

business expectancy with AutoZone perished when AutoZone asked for

the second bid. Southprint did not negotiate the details of the

chain-wide contract with AutoZone during the May 10 phone call. Its

valid business expectancy did not extend to details not discussed

at that time. What business it could reasonably expect—to serve as

AutoZone’s vendor for whatever term AutoZone had specified—it

realized when AutoZone ultimately opted for Southprint. Without

loss of the business expectancy, there is no tortious interference.

Because      Southprint     never     lost     its   business   expectancy      with

AutoZone, the district court's decision is affirmed.

                                          D.

       Finally, Southprint appeals the district court’s dismissal of

its claim of business defamation. In its brief, Southprint focuses

entirely upon statements allegedly made to AutoZone by McGhee,

arguing that McGhee’s comments cast doubt on Southprint’s business

capabilities. This doubt, Southprint asserts, caused AutoZone to

ask    for   a    second    bid,    to   Southprint’s      detriment.     The   only

                                          12
potentially   objectionable   statement   made   by   McGhee   for   which

Southprint presents any evidence, however, cannot be considered

defamatory under the applicable Virginia law. The district court’s

order, therefore, is affirmed.2

     In its complaint, Southprint broadly alleged that H3 made

“false, misleading, and disparaging” statements about Southprint to

Southprint’s customers, and specifically claimed that McGhee told

Hurst, AutoZone’s buyer, “I know for a fact that they [Southprint]

do not have a Ford, Chevy and Dodge license.” (J.A. 17, 15.) In its

brief on appeal, Southprint highlights other allegedly defamatory

statements made by McGhee. In particular, Southprint points to the

recollections that AutoZone employees William Hull and William

Edwards have of conversations with McGhee. None of the incidents to

     2
      Southprint’s defamation claim should not, as H3 suggests, be
dismissed for having been pleaded improperly. Like any other civil
complaint in federal court not subject to heightened pleading
requirements, a defamation complaint must only provide a “short and
plain” statement of the claim that is sufficient to give the
defendant fair notice of the nature of the claim and the grounds
upon which it rests. See Hatfill v. N.Y. Times Co., 416 F.3d 320,
329 (4th Cir. 2005); see also Fed. R. Civ. P. 8(a)(2). Without
citing any authority, H3 contends that Southprint’s defamation
action should be dismissed because the complaint did not specify
that it would pursue a defamation per se claim. To state a claim
for defamation per se, though, a plaintiff need only allege “a
publication of false information concerning the plaintiff that
tends to defame the plaintiff’s reputation.” Hatfill, 416 F.3d at
330. Count II of Southprint’s complaint alleged that H3 knowingly
made “false, misleading, and disparaging statements” that “defamed”
Southprint and damaged its reputation in the industry. (J.A. 17.)
This formulation is sufficient to state a defamation per se claim
under the liberal, federal rules of pleading. See Hatfill, 416 F.3d
at 329; Fed. R. Civ. P. 8(a)(2).

                                  13
which Southprint points, however, suffice to defeat H3's motion for

summary judgment on the defamation claim.

     McGhee's   alleged   statement   to   Hurst   about   Southprint's

licenses does not create a genuine issue of material fact because

there is no evidence that McGhee actually made the statement. The

only references to the statement outside Southprint's complaint are

found in the depositions of McGhee and Hurst. Unsurprisingly,

McGhee denies ever making the statement. Hurst denies ever hearing

it. At this stage of the litigation, Southprint cannot prevail

solely on the basis of its pleading but must present specific facts

showing that there is a genuine issue for trial. See Anderson, 477

U.S. at 248-49. It has not done so here.

     Hull's recollections are insufficient to support a defamation

claim because he is unsure whether McGhee even made the statements

that Hull attributed to him. Asked if McGhee ever "specifically

questioned [Southprint's] sourcing capabilities,” Hull said:

     I'm sure if we had that discussion, it would have been
     something like, coming from [McGhee]: . . . You know,
     I've heard or [Southprint's] been known to do-to make
     promises and not fulfill. That's such a common discussion
     that there's no doubt in my mind we headed down that path
     at one point in time or another.

(J.A. 198.) The format of his answer makes clear that Hull was not

recalling the actual details of a specific conversation, but rather

dramatizing the likely contours of a discussion he assumed, on the

basis of his experience in these kinds of business deals, he must

have had. Such testimony cannot support a defamation action. Cf.

                                 14
Gov’t Micro Res., Inc. v. Jackson, 624 S.E.2d 63, 69 (Va. 2006)

(upholding a finding of defamation when two witnesses could not

recall the exact words of the supposedly defamatory statement but

other persons testified as to its content).

     Edwards, for his part, was more certain that he spoke with

McGhee about licenses but still a bit shaky on the details. He said

of a conversation with McGhee: "I don't believe he ever said: They

don't have licenses. I believe he questioned whether or not—I

believe the way he put it was: I'm not aware that anybody else has

the license and the ability to sell you the type of products that

we're talking about." (J.A. 227.) McGhee's alleged statements to

Edwards, even if made as Edwards believes they were, had no

tendency to defame.

     Whether or not “a statement is capable of having a defamatory

meaning is a question of law to be decided by the court." Hatfill

v. N.Y. Times Co., 416 F.3d 320, 330 (4th Cir. 2005) (citing Yeagle

v. Collegiate Times, 497 S.E.2d 136, 138 (Va. 1998)). Although a

speaker   may   not   escape   liability   for   defamation   by   couching

defamatory statements in the language of opinion, see Hatfill, 416

F.3d at 333-43 & n.6, some statements made by commercial actors

about other commercial actors will not be considered defamatory,

even if false, see Chaves, 335 S.E.2d at 103. There are some

falsifiable claims, "made by one competitor against another," that

can only be considered a "relative statement of opinion, grounded

                                    15
upon the speaker's obvious bias, and having no tendency to defame."

Id. McGhee’s statements to Edwards are such claims. Like the other

AutoZone representatives, Edwards testified that McGhee’s questions

were typical of vendors in this sort of situation, and that they

did not affect his decisions regarding Southprint in any way. Even

if it is true that McGhee said he was not aware anybody else had

the licenses H3 possessed, and even if Southprint in fact had the

licenses McGhee doubted it owned, McGhee's statements were not

defamatory.

                               IV.

     For the foregoing reasons the decision of the district court

is affirmed and Southprint’s claims against H3 are dismissed.

                                                          AFFIRMED

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