Smith v. Paoli Popcorn Co.

In March 1994, Paoli Popcorn Co. (Paoli) (defendant) agreed to buy the 1994 popcorn harvest of Stan Smith (plaintiff) for 10 cents per pound. After Smith harvested the popcorn in September 1994, it was discovered that some of the popcorn was contaminated with dirt or fungus. When Paoli’s agent Tom Harmon inspected the popcorn harvest, he indicated that it would be difficult to market the popcorn because of its quality. Between September 1994 and April 1995, Harmon and Smith had several discussions about the marketability of the popcorn, until Harmon formally rejected the popcorn in April 1995. Smith attempted to resell the popcorn to other companies by contacting companies to gauge interest, sending samples to potentially interested companies, and requesting bids. Smith sent samples of the contaminated popcorn so that the companies would know what the worst part of the harvest was like. Three companies placed bids to purchase the popcorn for five cents per pound, after which Smith negotiated among the companies, including Paoli, seeking higher bids. Colorado Cereal, Inc., eventually bid six cents per pound, after which Paoli bid 6.25 cents per pound. Negotiations between Smith and Paoli failed, after which Smith sold the popcorn to Colorado Cereal, Inc., for six cents per pound. Smith then sued Paoli to recover the difference between the agreed-to price with Paoli and the reduced resale price. Testimony from representatives at Colorado Cereal, Inc., and another local popcorn dealer indicated that Smith’s actions were in line with local business practices, had been taken in good faith, and resulted in a fair market price. Evidence indicated that six cents per pound was a fair market price. The trial court granted Smith’s motion for directed verdict, holding that Paoli had wrongfully rejected the popcorn and that Smith had acted in a commercially reasonable manner in reselling the popcorn, and a jury awarded damages. Paoli appealed.