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Gold Bond Stamp Co. v. Bradfute Corp.

decided: June 22, 1972.


Moore, Smith and Hays, Circuit Judges.

Author: Moore

MOORE, Circuit Judge:

Gold Bond Stamp Company of Georgia (Gold Bond) brought this action against Bradfute Corporation (Bradfute) to recover damages for an alleged breach of an oral agreement. Jurisdiction was premised upon 28 U.S.C. ยง 1332(a) (1). The District Judge, sitting without a jury, found the facts to be favorable to the plaintiff's position, 303 F. Supp. 532. A judgment against Bradfute was accordingly entered in the sum of $125,436. Bradfute appeals from this judgment. Gold Bond cross-appeals on the failure of the District Court to award interest. As many of the issues on this appeal turn on an evaluation of the evidence, a rather lengthy recitation of the facts is required.

I The Facts

The Parties

Gold Bond, a wholly-owned subsidiary of Gold Bond Stamp Company, was organized in early 1960 to promote and operate the Gold Bond Stamp Plan in the southeastern region of the United States. Under the Plan, Gold Bond engages retail stores as licensees of Gold Bond Stamps. A retailer's customer then receives stamps for purchases made, saves the stamps and ultimately redeems them for various articles of merchandise. Retail stores, by becoming licensees, are apparently able to increase their sales.

The incorporation of Gold Bond in 1960 was prompted by negotiations between the parent Gold Bond Company and Colonial Stores, Inc. (Colonial), a retail food supermarket chain located in southeastern United States. Shortly after the incorporation, Colonial became Gold Bond's major licensee in that region of the United States.

Bradfute designs sales-building games and contests and sells them to retail stores. In general, Bradfute also operates the promotion in behalf of the stores.

The dispute between Gold Bond and Bradfute is the result of errors which appeared in a sales promotion game which was purchased by Colonial. Prizes in the game were filled Gold Bond Stamp Books. The errors enabled an unexpectedly large number of Colonial's customers to win the prizes offered. At issue is the question of whether Bradfute should bear the cost of the errors.

The Agreement

In the spring of 1961 Howard Bradfute, president of Bradfute, communicated with Charles Johnston, business manager of Colonial, to determine whether Colonial was interested in purchasing a sales promotion game for the coming fall. Mr. Johnston indicated that Colonial, which had previously purchased a promotional game from Bradfute, was interested and suggested that Howard Bradfute talk to Warren Carlson of Gold Bond to determine whether Gold Bond stamps could be used as game prizes. Mr. Bradfute indicated that this was satisfactory as Gold Bond had been involved in other promotions.

Prior to this initial presentation of the plan to Colonial, Bradfute had also communicated with personnel of Gold Bond to interest the Company in a possible Bradfute-Colonial promotional program. As a result of these communications and the conversations with Mr. Johnston, Howard Bradfute arranged to meet representatives of Gold Bond on June 1, 1961, the day before Bradfute's promotional plan was to be formally presented to Colonial.

At the June 1 meeting, Mr. Bradfute described the promotional game to Gold Bond's representatives including Mr. Carlson. As then described, the promotion would be a bingo-type game. Game cards would first be distributed to Colonial's customers. Colonial would then publish a list of numbers, furnished by Bradfute, in local newspaper advertisements. The customers would match the numbers to those appearing on their cards and if they were able to match a complete row, they would win the prize indicated on the card. This process would be repeated each week as new cards would be distributed.

During the course of this presentation, Mr. Bradfute emphasized the benefits which would accrue to Gold Bond if it agreed to furnish filled stamp books as prizes. These benefits were premised upon the projections of increased traffic and sales in the Colonial stores. As people became interested in the game, Colonial's sales would presumably increase. This increase would generate an increase in the use of Gold Bond stamps and Gold Bond would enjoy greater sales.

In addition to the oral explanation of how Gold Bond would benefit from the game, Mr. Bradfute handed the Gold Bond representatives a letter which began: "the program we offer Gold Bond is quite simple." This letter contained a projection as to the cost to Gold Bond for its participation and an enumeration of the reasons why Gold Bond would benefit if it supplied the prizes.

Gold Bond's representatives recognized the fact that their company could only benefit if the number of prizes could be limited. In response to questions as to the number of books Gold Bond would be required to distribute, Mr. Bradfute assured the representatives that the game was absolutely controlled by a mathematical formula. In addition to the oral assurance, Mr. Bradfute handed them promotional material which had been prepared for a similar game. This material contained a "guarantee" that the mathematical formula ...

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