-
USCA1 Opinion
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
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No. 93-1615
CRELLIN TECHNOLOGIES, INC.,
Plaintiff, Appellant,
v.
EQUIPMENTLEASE CORP,
Defendant, Appellee.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
[Hon. Ernest C. Torres, U.S. District Judge]
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Before
Selya, Circuit Judge,
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Bownes, Senior Circuit Judge,
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and Cyr, Circuit Judge.
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Jeffrey C. Schreck, with whom Neal J. McNamara and Flanders
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& Medeiros, Inc. were on brief, for appellant.
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Netti C. Vogel, with whom Vogel, Souls & Woodbine was on
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brief, for appellee.
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March 8, 1994
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SELYA, Circuit Judge. This appeal teaches that, just
SELYA, Circuit Judge.
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as "negotiations and love songs are often mistaken for one and
the same," Paul Simon, Train in the Distance, on Negotiations and
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Love Songs (Warner Bros. Records 1981), so, too, negotiations and
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binding contracts readily can be confused. The lyrics follow.
I. BACKGROUND
I. BACKGROUND
Plaintiff-appellant Crellin Technologies, Inc.
(Cretco), a Rhode Island corporation, sells, rents, services, and
provides parts for lift trucks and other materials handling
equipment. In 1990, Crellin suffered from a serious cash flow
malady. In order to stanch the financial hemorrhaging caused by
steep monthly payments to institutional lenders, Richard Crellin,
Cretco's chief executive officer and part owner, began exploring
various options. Crellin knew that, on occasion, defendant-
appellee Equipmentlease Corporation (ELC), a Massachusetts firm,
had provided financing for certain of Cretco's customers.
Consequently, Crellin sought to interest an ELC representative,
Mark Patterson, in structuring a sale and leaseback.1 Cretco
proposed to sell its fleet of lift trucks to ELC and then lease
back the fleet, keeping the equipment available for use in the
ordinary course of Cretco's business. Cretco planned to apply
some or all of the sale proceeds to pay down its institutional
debt, thereby easing the cash flow crunch and enhancing the
prospect that its principal lender, Old Stone Bank (Old Stone),
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1Patterson, who worked out of ELC's Rhode Island office, was
a friend of Richard Crellin's brother, Douglas Crellin, and
previously had done business with Cretco.
2
would provide long-term financing on less onerous terms.
After reviewing what it thought were Cretco's complete
financial statements,2 ELC agreed that a sale/leaseback
transaction might prove feasible. In November of 1990, ELC
prepared the paperwork that it needed to start a formal
commitment process. But ELC's overtures went unrequited, for Old
Stone had not agreed to release its security interest in the
fleet. Thus, Cretco refused to sign ELC's documents.
During the period from November 1990 to February 1991,
Cretco and ELC maintained an ongoing dialogue. Although Cretco
now portrays these communications as reassurances that ELC was
committed to a sale and leaseback, the trial court supportably
found them to be mere expressions of a continuing mutual interest
directed toward finding agreeable terms on which to do a deal of
some undetermined magnitude.
In February of 1991, Cretco made its peace with Old
Stone and received the long-awaited agreement for release of the
bank's security interest. Cretco relayed the good news to ELC on
or about March 1, and requested a meeting. On March 11, 1991,
Richard Crellin travelled to ELC's Worcester (Massachusetts)
office and signed papers prepared by ELC. At the same time, ELC
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2When Cretco submitted financial data to ELC in the fall of
1990, it omitted certain relevant segments of its financial
history and projections. The omitted material would have
revealed both a lower net worth and a decreased likelihood of
future profitability. At trial, the district judge found that
this omission came about through inadvertence, not through
intentional misrepresentation. Nevertheless, the financial
statements, as presented, were both misleading and incomplete.
3
executed subordination and option agreements prepared by
Cretco.3
The parties dispute the legal significance of these
events. In one corner, Cretco contends that, in the March 1
call, Richard Crellin gave the green light to consummating the
sale/leaseback contract negotiated between the parties in
November 1990 and that he reinforced this clearance by
executing the documents proffered to him on March 11. In the
opposing corner, ELC contends that neither the March 1 telephone
conversation nor the March 11 signing carried any legal weight;
the call was purely informational and the documents were designed
merely to restart the formal commitment process for a new, albeit
resurrected, sale and leaseback. ELC points out that the
proffered papers were in different dollar amounts and on
different terms than the documents prepared in late 1990, and
that, at any rate, it never signed them.
The record is at sixes and sevens regarding the reasons
why ELC applied the brakes. Richard Crellin testified that ELC
led him to believe that the documents would be signed soon after
March 11, and Cretco viewed ELC's failure to do so as a breach of
contract. ELC's witnesses told a much different story. They
said ELC informed Richard Crellin that, in pursuance of its
customary practice, the document package had to be submitted to
ELC's funding source, BayBank, for approval before ELC would
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3Unless and until a sale and leaseback transpired, these two
documents were meaningless; neither of them had any independent
force.
4
enter a firm agreement. According to these witnesses, a final
set of contract documents ultimately would have been generated
if, having been assured that funds were available, management
made a binding decision to do the deal.
It is undisputed that ELC approached BayBank to supply
the needed funds, and that BayBank turned thumbs down.
Thereafter, ELC requested additional information from Cretco and
submitted a revised request. BayBank again refused to open the
purse strings, reportedly due to Cretco's anemic financial
status. It was for this reason, then, that ELC decided not to go
forward with a sale and leaseback.
To make a tedious tale tolerably terse, Cretco
eventually invited ELC to honor what it perceived as a binding
contract. ELC declined the invitation, saying that no contract
ever existed. Invoking diversity jurisdiction, 28 U.S.C. 1332
(1988), Cretco sued ELC in the United States District Court for
the District of Rhode Island. It charged, inter alia, that ELC
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ignored a binding obligation,4 dishonored the implied covenant
of good faith and fair dealing that formed part of the
contractual relationship, and violated a Massachusetts unfair
trade practices statute by deceptive dealing.
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4At various times, Cretco has argued either that a bilateral
contract underpinned the breach of contract count ELC made a
firm offer in November of 1990 and Cretco accepted the offer at
that time, subject to a condition (the procuring of Old Stone's
consent) that was fulfilled the following March or,
alternately, that ELC extended a unilateral offer, subject to
Cretco's later acceptance. Whichever way the scenario is viewed,
the upshot of the litigation remains unaffected.
5
After a bench trial, the district judge found that
appellant had not proven any of its three claims. On the breach
of contract count, the judge determined that there had been no
mutuality of obligation and, therefore, no binding contract. In
this vein, he noted, inter alia, that Cretco had not purported to
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make a timely acceptance of ELC's proposal; that, throughout the
negotiations, Cretco endeavored to keep any agreement contingent
upon its ability to secure new (and more manageable) bank
financing; that Cretco could not have sold the fleet without
first obtaining Old Stone's consent to the release of its
security interest a consent that did not materialize in 1990;
that, before litigation became an option of choice, Cretco had
not viewed the November 1990 documents as binding; and that
Cretco had shopped around in the ensuing months for a better
interest rate. The judge found that ELC, too, had kept its
powder dry, for it intended all along though it had not
informed Cretco about this contingency in the fall of 1990 to
condition any sale and leaseback upon approval by its own funding
source. Hence, since both parties believed the transaction to be
contingent upon other occurrences, controllable by them Cretco,
for example, did not have to accede to Old Stone's terms, and,
similarly, ELC did not have to accede to the terms demanded by
its funding source mutuality of obligation did not exist.
In a commendable effort to cover the waterfront, the
judge identified an alternative ground for dismissing the
contract claim. Even if one assumed, for argument's sake, that a
6
contract had been formed and that ELC had broken it, Cretco's
first count sought only compensatory damages, not specific
performance, and Cretco had not proven that it suffered or
sustained any recoverable damages.
Cretco's other two counts fared no better. In regard
to good faith and fair dealing, the judge reasoned that, because
no enforceable contract existed, there could be no breach of an
implied covenant arising out of that non-contract. As to chapter
93A, the judge found that the deceptive practices of which Cretco
complained, if they occurred at all, did not occur in the course
of trade or commerce, and, therefore, did not transgress the
cited statute.
Cretco appeals. We affirm.
II. THE BREACH OF CONTRACT CLAIM
II. THE BREACH OF CONTRACT CLAIM
We divide our discussion of this issue into segments,
first addressing choice of law and then confronting the merits of
appellant's claim.
A. Choice of Law.
A. Choice of Law.
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It is, of course, a black-letter rule that state
substantive law must be applied by a federal court sitting in
diversity jurisdiction. See Erie R.R. Co. v. Tompkins, 304 U.S.
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64, 78 (1938). In determining what state law pertains, the court
must employ the choice-of-law framework of the forum state, here,
Rhode Island. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S.
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487, 491 (1941); Putnam Resources v. Pateman, 958 F.2d 448, 464
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(1st Cir. 1992). Choice-of-law judgments are legal in nature,
7
and courts of appeals exercise plenary oversight in respect
thereto. See Soo Line R.R. Co. v. Overton, 992 F.2d 640, 643
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(7th Cir. 1993); Waggoner v. Snow, Becker, Kroll, Klaris, &
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Krauss, 991 F.2d 1501, 1505 (9th Cir. 1993); Putnam Resources,
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958 F.2d at 466. Consequently, a de novo standard of review
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obtains.5
1. The Local Landscape. Rhode Island law anent
1. The Local Landscape.
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contract conflict-of-law principles is sparse and leaves the
proper choice-of-law test for contract cases shrouded in
uncertainty. In 1969, Rhode Island's highest court made use of
the lex loci contractus doctrine in such a context. See Union
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Sav. Bank v. DeMarco, 254 A.2d 81, 83 (R.I. 1969) (holding a loan
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granted in Massachusetts to be a Massachusetts contract governed
by Massachusetts law). Three years later the court, when asked
to endorse the neoteric interest-weighing approach to contract
conflict issues as enunciated in the Restatement (Second) of the
Conflict of Laws 188 (1971) (hereinafter "Restatement"),
expressly declined to choose between the new and the old choice-
of-law rules. See A.C. Beals Co. v. Rhode Island Hosp., 292 A.2d
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865, 871 n.5 (R.I. 1972). Two subsequent Rhode Island cases that
touch upon the question transmit mixed signals. In Matarese v.
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Calise, 305 A.2d 112 (R.I. 1973), a case calling for a choice
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between local law and the law of a foreign sovereign, the court
cited with approval a statement favoring resort to the law of the
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5In this case the district court, while leaving spoor for
the cognoscenti, made no explicit choice of law. We, therefore,
write on a pristine page.
8
place of contracting. See id. at 118 n.4 (dictum; citing
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Annotation, 72 A.L.R. 250 (1931)). Two decades later, the court
indicated a preference for an interest-weighing analysis.6 See
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Gordon v. Clifford Metal Sales Co., 602 A.2d 535, 539 (R.I. 1992)
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(dictum; implying approval of rule enunciated in Restatement 6
for choice of law involving "a simple contracts issue governed by
general contract principles").
Federal district courts sitting in Rhode Island have
spoken to the issue in differing tones. Some have invoked the
law of the place of contracting, see, e.g., Everett/Charles
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Contact Prods., Inc. v. Gentec, S.A.R.L., 692 F. Supp. 83, 89
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(D.R.I. 1988); SW Indus., Inc. v. Aetna Cas. & Sur. Co., 653 F.
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Supp. 631, 639 (D.R.I. 1987), and some have invoked the interest-
weighing test, see, e.g., Marshall Contractors, Inc. v. Peerless
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Ins. Co., 827 F. Supp. 91, 94 (D.R.I. 1993); Albany Ins. Co. v.
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Wisniewski, 579 F. Supp. 1004, 1013 (D.R.I. 1984).
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2. Discussion. We need not attempt to resolve this
2. Discussion.
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impasse by venturing an informed prophecy as to which test will
emerge triumphant in the Rhode Island courts. Here,
providentially, Rhode Island law must prevail under either
choice-of-law format.
For purposes of the older "place of contracting" test,
the Rhode Island Supreme Court has held that the place of
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6Courts and commentators use a variety of compound
adjectives, such as "interest-weighing" and "locus-of-interests,"
to describe the more modern approach. For ease in reference, we
employ the term "interest-weighing."
9
contracting is the place in which the last act that forms the
contract is performed. See Tim Hennigan Co. v. Anthony A. Nunes,
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Inc., 437 A.2d 1355, 1357 (R.I. 1981); A.C. Beals, 292 A.2d at
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870-71. Counsel for Cretco maintained at oral argument in this
court that the contract solidified on or about March 1, 1991,
when Richard Crellin telephoned ELC to relay the news of Old
Stone's agreement to release its security interest. This
telephone call originated in Rhode Island. Thus, even though ELC
received the call in Massachusetts, the final act of contract
formation took place in Rhode Island. The rule is that, when a
contract is cinched in the course of an interstate telephone
call, the contract will be deemed to have been made in the state
where the decisive words were spoken. See, e.g., Perry v. Mount
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Hope Iron Co., 5 A. 632, 633 (R.I. 1886) (holding that an offer
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accepted by telegraph will be deemed accepted where telegram is
sent, not where it is received); see also John E. Murray, Jr.,
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Murray on Contracts 47G, at 152 (3d ed. 1990) (explaining
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proper rule for acceptance of offer by telephone; where parties
are at a distance, "acceptance will have occurred where and when
the acceptance was spoken or sent"). Hence, under the place of
contracting rule, Rhode Island law applies to the breach of
contract count.
The functional interest-weighing approach to conflict
analysis for contract issues yields the same result. This
approach requires a court to take cognizance of overall policy
goals even as it evaluates the significance of the parties'
10
contacts with various jurisdictions and their conduct as a
contract is negotiated, consummated, and performed. See
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Restatement 6, 188. On the policy side, the Restatement
suggests that a court inquiring into choice of law consider (1)
the needs of the interstate system; (2) relevant policies of the
forum; (3) policies of other affected states and their interest
in the outcome of the litigation; (4) protection of the parties'
justified expectations; (5) uniformity and predictability of
results; and (6) ease in determining and applying different
bodies of law, see id. 6. This panoply of policy
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considerations is to be assessed against a more traditional, more
concrete backdrop comprised of (1) the place of contracting; (2)
the situs of negotiations; (3) the place of performance; (4) the
location, if any, of the contract's subject matter; and (5) the
business locations and states of incorporation of corporate
parties, see id. 188.7
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Under an interest-weighing analysis, appellant's
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7Choice of law in a contract case requires a court to make a
threshold determination as to the efficacy of any choice-of-law
provision that the parties may have included in the contract
documents. Here, the draft lease submitted by ELC to Cretco in
November 1990 contained a provision for construction and
enforcement according to Massachusetts law. We disregard this
provision for three reasons. First, Cretco never signed the
document in question, and the provision did not reappear in later
documents. Second, neither party mentioned the provision in
appellate briefs nor argued that it should be given effect.
Third, while section 187 of the Restatement indicates that an
effective choice-of-law provision in a contract document
generally should be respected, that rule "is applicable only in
situations where it is established to the satisfaction of the
forum that the parties have chosen the state [to be the source]
of the applicable law." Restatement 187, cmt. a. This is not
such a case.
11
contract claim is governed by Rhode Island law. Cretco is a
Rhode Island corporation. ELC, albeit headquartered in
Massachusetts, maintains an office in Providence, Rhode Island.
Cretco initiated and continued negotiations with ELC's
representative, Mark Patterson, in Providence.8 Although
performance of the sought-after contract would have overspread a
wide geographic area, the cash infusion generated by the sale and
leaseback was to have taken place in Rhode Island and was to have
been used in large part to retire debt owed to a Rhode Island
lender. The fleet would continue to be based in Rhode Island and
to be monitored by Cretco's Rhode Island headquarters.
In addition, an application of Rhode Island law
furthers the general principles and policy goals limned in the
Restatement. Rhode Island is the forum state. It has a
legitimate stake in the outcome of the suit: Cretco is domiciled
in Rhode Island and its economic viability is at risk. This
interest clearly outweighs Massachusetts' interest in the suit
(which is limited to the impact of one soured relationship
between an in-state defendant and one of its many out-of-state
clients). The combination of appellant's home base, ELC's
presence in Rhode Island, and the incidence of negotiations
involving a Rhode Island representative of ELC should have led
thoughtful parties to expect that Rhode Island law would govern
their dealings. Last, the law of the forum, other things being
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8After the initial discussions, negotiations continued in
Rhode Island, Massachusetts, and Connecticut.
12
equal, is ordinarily to be preferred; Rhode Island's is the most
natural, and, therefore, the easiest law for the district court
to apply. We think it follows that, under an interest-weighing
analysis, the substantive law of Rhode Island controls
appellant's contract claim.
To recapitulate, regardless whether lex loci contractus
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or an interest-weighing approach prevails, a Rhode Island court
would apply Rhode Island substantive law to appellant's contract
claim. Thus, the federal district court, sitting in Rhode
Island, was obliged to do the same. In turn, this court must
also utilize Rhode Island law and we must do so without
deference to the district court's construction of that law. See
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Salve Regina Coll. v. Russell, 111 S. Ct. 1217, 1221 (1991).
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B. The Merits.
B. The Merits.
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The district judge, sitting without a jury, found that
the end product of the negotiations between Cretco and ELC lacked
mutuality of obligation, and, consequently, did not achieve the
status of a contract. Appellant polemicizes the court's ruling
that no enforceable contract existed between the parties,
claiming that the court grossly undervalued the evidence showing
that ELC actively demonstrated its continuing interest in, and
commitment to, a sale and leaseback.
1. Standard of Review. When a case is tried to the
1. Standard of Review.
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bench, we review the trial court's findings of fact with
considerable solicitude, disturbing those findings only for
mistake of law or clear error. See Cumpiano v. Banco Santander,
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13
902 F.2d 148, 152 (1st Cir. 1990); Reliance Steel Prods. Co. v.
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National Fire Ins. Co., 880 F.2d 575, 576 (1st Cir. 1989); see
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also Fed. R. Civ. P. 52(a). To be sure, appellant strives to
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blunt the force of this rule by pointing out that mistakes of
state law are subject to plenary review, see Salve Regina Coll.,
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111 S. Ct. at 1221, and then dressing quintessentially factual
matters in the garb of "legal error." But factual issues are
demonstrably different than legal issues, and no amount of slick
costumery can transform the one into the other.
We have consistently held that, so long as the evidence
does not point unerringly in a single direction but is capable of
supporting conflicting inferences, the question of whether a
contract has been formed between two parties is a question of
fact to be determined by the factfinder. See, e.g., Bushkin
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Assocs., Inc. v. Raytheon Co., 815 F.2d 142, 145, 151 (1st Cir.
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1987); Chedd-Angier Prod. Co. v. Omni Pub'ns Int'l, Ltd., 756
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F.2d 930, 935 (1st Cir. 1985). Here, appellant's argument
centers around the issue of contract formation and questions the
district court's findings anent mutuality of obligation. These
questions are appropriately classified as questions of fact,
subject to clear-error review. Within this paradigm, a finding
concerning a party's intent to contract is a finding of fact.
See Gel Systems, Inc. v. Hyundai Eng'g & Constr. Co., 902 F.2d
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1024, 1027 (1st Cir. 1990); Reliance Steel, 880 F.2d at 576.
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In reaching this conclusion, we expressly reject
appellant's asseveration that the issue of mutuality demands de
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14
novo review simply because it involves a mixed question of law
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and fact. While such an issue does present a "mixed" question,
mixed questions, to the extent that they are fact-dominated, are
subject to clear-error review, not de novo review. See In re
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Howard, 996 F.2d 1320, 1328 (1st Cir. 1993); Roland M. v. Concord
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Sch. Comm., 910 F.2d 983, 990 (1st Cir. 1990), cert. denied, 499
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U.S. 912 (1991). Therefore, unless appellant can show that the
district court incorrectly applied a legal rule or standard
and, here, no such mistake of law looms the court's findings in
regard to mutuality must be upheld so long as they are not
clearly erroneous. See Roland M., 910 F.2d at 990; Thrifty Rent-
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A-Car Sys., Inc. v. Thrift Cars, Inc., 831 F.2d 1177, 1181-82
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(1st Cir. 1987); RCI Northeast Servs. Div. v. Boston Edison Co.,
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822 F.2d 199, 202 (1st Cir. 1987).
2. Mutuality of Obligation. The law requires
2. Mutuality of Obligation.
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mutuality of obligation as a prerequisite to a binding bilateral
contract. See B & D Appraisals v. Gaudette Mach. Movers, Inc.,
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733 F. Supp. 505, 507 (D.R.I. 1990); Law v. Law Trucking Co., 488
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A.2d 1225, 1228 (R.I. 1985); see generally 1 Richard A. Lord,
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Williston on Contracts 1:17, at 44 (4th ed. 1990). This
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mutuality can be evidenced by an exchange of promises. See B & D
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Appraisals, 733 F. Supp. at 508; Judd Realty, Inc. v. Tedesco,
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400 A.2d 952, 956 (R.I. 1979); see generally Murray on Contracts,
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supra, 65, at 269 n.48.
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Appellant argues that this benchmark has been achieved.
It seems to be saying that the documents submitted to it by ELC
15
in 1990 embodied an offer, duly accepted by a return promise at
the time, subject, however, to a contingency (Old Stone's consent
to releasing its security interest); and that removal of the
contingency took place on or about March 1, 1991, when appellant
informed ELC of Old Stone's acquiescence.9 But this scenario
overlooks or, at least, impermissibly discounts the district
court's factfinding.
To show mutuality of obligation, both parties must have
been legally bound through the making of reciprocal promises.
Here, the court thought that both ELC and Cretco intended any
agreement to be tentative, ergo, nonbinding, until other things
happened. As to ELC, the court found that it intended agreement
to await approval by one of its funding sources an approval
that never materialized. This finding is amply supported. After
all, ELC never signed the documents it proffered to Cretco in
1990. The next spring, ELC declined to sign the new set of lease
documents. At that time, ELC asked for, and Cretco supplied,
additional financial information for the sole purpose of
attempting to convince BayBank, an ELC funding source, to
underwrite the transaction. The record is barren of evidence
that ELC received a funding commitment at any time. The record
is similarly barren of evidence that ELC did major deals without
outside funding. These facts strongly support the district
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9From time to time, appellant shifts gears. On those
occasions, it seems to be saying that ELC's offer was unilateral
and remained open until March 1, 1991, when appellant accepted
the arrangement. We cover this possibility in Part II(B)(3),
infra.
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16
court's finding that ELC did not intend to bind itself through
the submission of preliminary transactional paperwork in 1990.
As to Cretco, the court concluded that it, too, lacked
the requisite intent to be bound. From its standpoint, entering
into a binding contract had to await two developments: the
extraction of a piece of paper from Old Stone and, in Judge
Torres's words, the obtaining of "satisfactory supplementary
financing." We believe that the court's subsidiary findings on
these points are sustainable; indeed, it was for these very
reasons that Cretco refused to execute the documents tendered to
it in 1990.
In an effort to undermine the court's determination
that it was not bound, appellant argues that its acceptance of
the November offer required it to do its utmost to gain the Old
Stone release. This argument will not wash. For one thing, it
glosses over the parallel, equally lethal finding that appellant
viewed any relationship with ELC as subject to the obtaining of
supplementary financing (in amounts, and on terms, satisfactory
to appellant). For another thing, both parties to a bilateral
contract must have made more than illusory promises for the
agreement to be binding. See John D. Calamari & Joseph M.
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Perillo, Contracts 4-17, at 160 (2d ed. 1977). It is settled
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law that, when the promised act is conditional on the occurrence
of a future event within the control of the promisor, the promise
is illusory. See Vickers Antone v. Vickers, 610 A.2d 120, 123
___ ______________ _______
(R.I. 1992); see also Calamari & Perillo, Contracts 4-17, at
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17
160. We see nothing in the 1990 "Equipment Lease Agreement" that
would indicate that appellant bound itself to have Old Stone
release its security interest in the fleet or to make any
particular efforts in this regard. Moreover, even if such an
obligation can somehow be implied out of thin air and we do not
think it can be the documents certainly impose no time limit on
when appellant would have to bring about this event, or what
concessions it would have to endure. Therefore, the procuring of
Old Stone's release, like the obtaining of supplementary
financing, was in appellant's unbridled discretion. At the most,
then, appellant gave ELC a mirage of a promise.
We add that appellant's actions belie its current
contention that the parties were bound in 1990 and thereafter.
During the critical period, appellant tried valiantly to forge
arrangements with other lending institutions arrangements that
would have left ELC out in the cold. Richard Crellin testified
that, as late as February of 1991, he approached Fleet Bank to
see if it would "offer a more attractive deal." He admitted on
cross-examination that he would have looked favorably upon Fleet
replacing both ELC and Old Stone in Cretco's plans had an offer
been forthcoming on comely terms.10 Thus, despite the fact
that appellant claims it was only scouting out supplemental
financing, the evidence is adequate to warrant the district
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10Mark Patterson testified that in early 1991 he believed
Cretco was "shopping around" for better financing terms and
biding its time in anticipation of a lower prime rate. It is
obvious from this and other evidence that ELC knew of Cretco's
ongoing forays into the financial markets.
18
court's contrary finding that appellant continued to seek other
financing options as a surrogate for, rather than as a supplement
to, an alliance with ELC. When, as in this case, the proof
supports more than one plausible view of the relevant events, and
the district court chooses one such view over another, the
court's choice cannot be clearly erroneous. See Anderson v. City
___ ________ ____
of Bessemer City, 470 U.S. 564, 574 (1985); Dedham Water Co. v.
_________________ ________________
Cumberland Farms Dairy, Inc., 972 F.2d 453, 457 (1st Cir. 1992).
____________________________
This finding is significant. Although appellant may
have exercised good business sense when it shopped the financial
markets for better terms in the winter of 1990-91, it cannot
plausibly claim that ELC was bound although it had no
corresponding obligation. Given, especially, three things the
discretionary nature of appellant's "obligation" to procure the
Old Stone release and the needed supplementary financing, its
concession that, in and after November of 1990, it believed that
"if it had wanted to, it could have gone elsewhere" for
financing,11 and the evidence that it acted on this stated
belief we do not perceive clear error in the district court's
finding that no obligation inured on Cretco's part.
____________________
11Appellant's counsel made the quoted statement to the
district court in final argument. Appellant, therefore, cannot
disclaim the statement on appeal. See, e.g., United States v.
___ ____ ______________
Dietz, 950 F.2d 50, 55 (1st Cir. 1991) (explaining that a party
_____
who, in hindsight, finds dissatisfaction with the arguments he
advanced in the district court "cannot switch horses mid-stream
in hopes of locating a swifter steed"); see also Patriot Cinemas,
___ ____ ________________
Inc. v. General Cinema Corp., 834 F.2d 208, 214 (1st Cir. 1987)
____ ____________________
(stating that when a litigant "asserts inconsistent statements of
fact" at different junctures in litigation, the doctrine of
"judicial estoppel" prevents unfair advantage).
19
To sum up, the trial court found that neither ELC nor
_______
Cretco undertook a binding obligation to the other. Either half
of this disjunctive finding is sufficient to warrant judgment for
the defendant on the breach of contract count. Both halves are
sustainable. Hence, the court's ultimate conclusion that no
enforceable contract existed because no mutuality of obligation
existed is unimpugnable.12
3. Unilateral Offer. Before leaving the breach of
3. Unilateral Offer.
________________
contract claim, we close one last door. Were we to characterize
the initial document submission as a unilateral offer a
characterization that appellant, for the most part, has
assiduously resisted appellant's lot would not be improved. As
the district court observed, the documents that ELC delivered in
November 1990 did not specify a time within which appellant had
to accept any offer they might have contained. It, therefore,
would have had a reasonable time within which to do so, for an
offer that does not contain a deadline for acceptance will lapse
after a reasonable time if it is not accepted. See Mathewson
___ _________
Corp. v. Allied Marine Indus., Inc., 827 F.2d 850, 853 (1st Cir.
_____ __________________________
1987) ("It is hornbook law that an offeree's power of acceptance
____________________
12Even if Massachusetts law supplies the rule of decision,
the result remains the same. Massachusetts also requires
mutuality of obligation as a prerequisite to the formation of a
binding contract. See, e.g., Graphic Arts Finishers, Inc. v.
___ ____ ______________________________
Boston Redev. Auth., 255 N.E.2d 793, 796 (Mass. 1970); Gill v.
____________________ ____
Richmond Co-op Ass'n, 34 N.E.2d 509, 513-14 (Mass. 1941); see
_____________________ ___
also Eliopoulos v. Makros, 77 N.E.2d 777, 779 (Mass. 1948)
____ __________ ______
(stating that mutuality of obligation is required for a binding
contract, although the parties' obligations need not be of equal
value).
20
vanishes at the time specified in the offer, and if no deadline
is prescribed, 'at the end of a reasonable time.'") (quoting
Restatement (Second) of Contracts 41(1) (1979)); see also
___ ____
Minneapolis & St. Louis Ry. v. Columbus Rolling Mill, 119 U.S.
____________________________ _____________________
149, 151 (1886); Thermo Electron Corp. v. Schiavone Constr. Co.,
_____________________ _____________________
958 F.2d 1158, 1164 (1st Cir. 1992). What amount of time is
reasonable within the context of a particular case is "a classic
example of a decision that the law leaves to a district court,
not to this court, to decide." Thermo Electron, 958 F.2d at
________________
1166; see also Murray on Contracts, supra, 41C, at 102.
___ ____ ___________________ _____
Appellant concedes that, generally, four months is an
unreasonably long time for a financing offer to remain open. We
agree with the district court that, in a period of rapidly
fluctuating interest rates and with no extenuating circumstances,
this case falls comfortably within the sweep of that generality.
Because it would have been thoroughly unreasonable for appellant
to believe that a sale/leaseback proposal made in November and
not then accepted would linger on the table until the following
March, a "unilateral offer" theory leads down a blind alley.
And, moreover, we discern no clear error in the trial court's
rejection of appellant's claim that the "offer" was periodically
refreshed by what appellant but not the court viewed as
continuing reassurances.
III. THE IMPLIED COVENANT CLAIM
III. THE IMPLIED COVENANT CLAIM
Appellant next claims that ELC breached an implied
covenant of good faith and fair dealing when it refused to
21
proceed with the alleged contract, and, adding insult to injury,
gave apocryphal reasons for its refusal to perform. When, as
now, a duty of good faith and fair dealing is alleged to arise
from a contractual relationship, a claim for breach of that duty
sounds in contract rather than in tort. See Bertrand v. Quincy
___ ________ ______
Market Cold Storage & Warehouse Co., 728 F.2d 568, 571 (1st Cir.
___________________________________
1984). This, in turn, dictates choice of law: the same
substantive law that governs the contract claim also governs the
implied covenant claim.
In this instance, then, Rhode Island law controls.
Rhode Island recognizes that virtually every contract contains an
implied covenant of good faith and fair dealing between the
parties. See A.A.A. Pool Serv. & Supply, Inc. v. Aetna Cas. &
___ _________________________________ _____________
Sur. Co., 395 A.2d 724, 725 (R.I. 1978); Ide Farm & Stable, Inc.
________ _______________________
v. Cardi, 297 A.2d 643, 645 (R.I. 1972); see also Fleet Nat'l
_____ ___ ____ ___________
Bank v. Liuzzo, 766 F. Supp. 61, 67 (D.R.I. 1991); Landry v.
____ ______ ______
Farmer, 564 F. Supp. 598, 611 (D.R.I. 1983). Because the implied
______
covenant exists "so that the contractual objectives may be
achieved," Ide Farm, 297 A.2d at 645, it necessarily follows that
________
where there is no contract, there is no duty. In such
circumstances, there is nothing from which the covenant can be
implied. Or, phrased differently, the law does not require
persons to act in particular ways in order to achieve illusory
contractual objectives.
On this basis, the covenant is left without visible
means of support, and no claim for a breach of it will lie. See
___
22
Jordan-Milton Mach., Inc v. F/V Teresa Marie, II, 978 F.2d 32, 36
________________________ ____________________
(1st Cir. 1992); cf. Gleason v. Merchants Mut. Ins. Co., 589 F.
___ _______ ________________________
Supp. 1474, 1477 (D.R.I. 1984) (applying same principle in
insurance context).
IV. THE UNFAIR TRADE PRACTICES CLAIM
IV. THE UNFAIR TRADE PRACTICES CLAIM
We come, finally, to appellant's unfair trade practices
claim. This claim invokes a Massachusetts statute that provides
in relevant part:
[A]ny person who engages in the conduct
of any trade or commerce and who suffers any
loss of money or property, real or personal,
as a result of the use or employment by
another person who engages in any trade or
commerce of an unfair method of competition
or an unfair or deceptive act or practice . .
. may, as hereinafter provided, bring an
action . . . for damages . . . .
Mass. Gen. L. ch. 93A, 11 (1984). The district court, without
making an explicit choice-of-law determination, dismissed the
claim on the ground that the interdicted conduct did not occur in
trade or commerce.
Appellant's chapter 93A claim is really two separate
but related claims. We deal with them seriatim. The first
________
initiative fails to state a cause of action even if chapter 93A
applies, and we dispose of it on that basis.13 The second
initiative is a horse of a different hue; if chapter 93A applies,
it arguably states a claim. Consequently, we treat the choice-
of-law question that necessarily precedes substantive
____________________
13Thus, we make no choice-of-law determination as to whether
the substantive law of Massachusetts would apply to the conduct
underlying this first initiative.
23
consideration of this initiative.
A. The First Half of the Chapter 93A Claim.
A. The First Half of the Chapter 93A Claim.
_______________________________________
Appellant's initial charge that ELC, by blaming the
collapse of the deal on Cretco's financial plight rather than on
its own empty coffers, misrepresented its reason for refusing to
proceed with the sale and leaseback need not detain us.
Although Judge Torres found that ELC had not informed appellant
that its participation in the deal would hinge upon the
availability of funding, there is no credible evidence that ELC
ever made express representations to the contrary. Thus, even if
we assume the truth of the charge, no reasonable factfinder could
conclude that ELC's conduct in this respect descended to the
level of rascality required for a successful chapter 93A suit.
See, e.g., Gooley v. Mobil Oil Corp., 851 F.2d 513, 515-16 (1st
___ ____ ______ _______________
Cir. 1988) (explaining that, "[i]n Massachusetts, the litmus test
for transgression of chapter 93A involves behavior which falls
within ``the penumbra of some . . . established concept of
unfairness'") (quoting Massachusetts cases); Levings v. Forbes &
_______ ________
Wallace, Inc., 396 N.E.2d 149, 153 (Mass. App. Ct. 1979)
______________
(explaining that "objectionable conduct must attain a level of
rascality that would raise an eyebrow of someone inured to the
rough and tumble of the world of commerce" in order to support a
chapter 93A action); see also Maruho Co. v. Miles, Inc., ___ F.3d
___ ____ __________ ___________
___, ___ (1st Cir. 1993) [No. 93-1385, slip op. at 11]; Quaker
______
State Oil Refining Corp. v. Garrity Oil Co., 884 F.2d 1510, 1513
________________________ _______________
(1st Cir. 1989); Whitinsville Plaza, Inc. v. Kotseas, 390 N.E.2d
_________________________ _______
24
243, 251 (Mass. 1979); Rex Lumber Co. v. Acton Block Co., 562
_______________ ________________
N.E.2d 845, 850 (Mass. App. Ct. 1990). Whether or not full
disclosure during arm's-length business negotiations is more
likely the exception than the rule, a failure fully to disclose,
standing alone, while sometimes actionable in tort, ordinarily
will not transgress chapter 93A. So it is here.
B. The Second Half of the Chapter 93A Claim.
B. The Second Half of the Chapter 93A Claim.
________________________________________
The second basis for the appellant's chapter 93A claim
arguably consists of sterner stuff. During pretrial discovery,
ELC produced a handwritten credit decision memorandum (CDM) dated
November 2, 1990. Attached to the CDM was a note purportedly
written to Mark Patterson, advising him that the handwritten memo
superseded a typed CDM of the same vintage. The difference
between the two memoranda is of import. The typed CDM stated
that the sale and leaseback had been approved.14 The
handwritten version, however, conditioned the approval on a
thoroughgoing review of appellant's financial status and a
favorable reaction by an ELC funding source. By the time the
case reached trial, appellant had integrated ELC's gamesmanship
during discovery with its other purported peccadilloes, and
charged that the handwritten CDM was a fake, manufactured after
the fact in order to lay the groundwork for ELC's defense.
Even if we assume, arguendo, that the described conduct
________
____________________
14Although ELC did not produce the typed version in pretrial
discovery, appellant knew of its existence through viewing an
informal file that Patterson kept at home. At trial, Patterson
testified that he had never seen either the handwritten CDM or
the accompanying note.
25
might infract chapter 93A, see generally Quaker State, 884 F.2d
___ _________ _____________
at 1513-14 (discussing when tactics in, and related to, ongoing
litigation may prove actionable under chapter 93A), we
nevertheless must pause at the choice-of-law threshold.
Recognizing that a defendant in a contract case governed by one
state's law nonetheless may be subject to the provisions of
another state's unfair trade practices statute, see, e.g.,
___ ____
Computer Sys. Eng'g, Inc. v. Qantel Corp., 740 F.2d 59, 64 nn.6,7
_________________________ ____________
(1st Cir. 1984), that result will obtain only if the forum
state's choice-of-law rules so dictate, see id. at 70.
___ ___
Considering this possibility brings into play the principle of
depecage, which we have described as "the framework under which
different issues in a single case . . . may be decided according
to the substantive law of different states." Putnam Resources,
_________________
958 F.2d at 465.
For choice-of-law purposes, we treat appellant's
chapter 93A initiative as a species of tort claim. At least one
federal court has made the across-the-board assessment that
chapter 93A claims "should be treated uniformly, rather than on a
case-by-case basis, in the same way as tort claims." Computer
________
Sys. Eng'g, Inc. v. Qantel Corp., 571 F. Supp. 1365, 1371 (D.
_________________ _____________
Mass. 1983), aff'd, 740 F.2d 59 (1st Cir. 1984). We need not go
_____
so far. We hold that, at minimum, when a chapter 93A claim and
the requested remedy are highly analogous to a tort claim and
remedy, the chapter 93A claim should be considered as a tort for
choice-of-law purposes. See id. at 1370-71; see also Michael C.
___ ___ ___ ____
26
Gilleran, The Law of Chapter 93A 12:8, at 413 (1989); cf.
________________________ ___
Northeast Data Sys., Inc. v. McDonnell Douglas Computer Sys. Co.,
_________________________ ___________________________________
986 F.2d 607, 609 (1st Cir. 1993) (holding that a chapter 93A
claim may trigger a contractual conflicts analysis where it is
essentially an "embroidered" contract claim).
In applying these principles, we focus only on the
arguably actionable conduct, i.e., appellant's second chapter 93A
____
initiative.15 In that initiative, appellant claimed that ELC
manufactured evidence in an attempt to justify its
nonperformance. This charge resembles the tort of fraudulent
misrepresentation. Similarly, appellant asked for a tort-like
remedy (multiple damages and attorneys' fees). Thus, we consider
this species of chapter 93A claim as falling under the tort
rubric for purposes of our choice-of-law assessment.
In tort cases, Rhode Island uses a multipart analysis
to determine which of two states has the more significant
interest in the resolution of the issue presented in the case.
See Pardey v. Boulevard Billiard Club, Inc., 518 A.2d 1349, 1351
___ ______ ______________________________
(R.I. 1986); accord Brown v. Church of the Holy Name of Jesus,
______ _____ _________________________________
252 A.2d 176, 178 (R.I. 1969); Woodward v. Stewart, 243 A.2d 917,
________ _______
923 (R.I.), cert. dism'd, 393 U.S. 957 (1968); see also Putnam
_____ ______ ___ ____ ______
Resources, 958 F.2d at 464; Fashion House, Inc. v. K Mart Corp.,
_________ ___________________ ____________
892 F.2d 1076, 1092 (1st Cir. 1989); Montaup Elec. Co. v. Ohio
__________________ ____
____________________
15We express no opinion as to what choice-of-law analysis
might have applied to appellant's first chapter 93A initiative,
or how the conflicts issue would have played out, for such
matters are beyond the scope of this opinion, see supra note 13.
___ _____
27
Brass Corp., 561 F. Supp. 740, 744-45 (D.R.I. 1983).
___________
General choice-of-law principles that should guide a
court in making such a determination include (1) predictability
of results; (2) maintenance of interstate order; (3)
simplification of the judicial task; (4) advancement of the
forum's governmental interests; and (5) application of the better
rule of law. See Putnam Resources, 958 F.2d at 464-65; Brown,
___ ________________ _____
252 A.2d at 178; Woodward, 243 A.2d at 923; see also Restatement
________ ___ ____
6. In considering these general principles, tort conflict-of-
law analysis weighs more heavily the needs of the interstate
system, the policies of the interested states as well as the
forum, and the ease of determination and application of the law.
See Restatement 145, cmt. b. In the tort context, these
___
overarching tenets may take into account a number of other
factors, including (1) the place of injury; (2) the place where
the conduct which caused the injury occurred; (3) the place of
incorporation and place of business of each party; and (4) the
locus, or center of gravity, of the parties' relationship. See
___
Putnam Resources, 958 F.2d at 464; Fashion House, 892 F.2d at
________________ ______________
1092; Brown, 252 A.2d at 179; see also Restatement 145(2).
_____ ___ ____
An application of these factors reveals that Rhode
Island has a more significant interest than Massachusetts in the
resolution of this claim. Appellant initiated negotiations with
ELC in Rhode Island and interstate policy does not dictate
prosecution under the Massachusetts statute of every deceptive
trade allegation brought against a company headquartered in
28
Massachusetts but doing business in another state. Rhode Island
has a substantial interest in protecting its resident companies
from deceptive representations or unfair trade practices,
especially those that may occur within its borders. As it is the
forum state, an application of Rhode Island's tort law would be
more easily accomplished than an application of Massachusetts
law.
Then, too, in addition to the Rhode Island locus of the
claimed injury, the allegedly tortious conduct also possesses
substantial links to Rhode Island. Appellant's claim arose when
Douglas Crellin visited Mark Patterson at his Rhode Island home
and saw the typed version of the CDM. The coverup itself if
one took place must have been crafted in the course of pretrial
discovery in a Rhode Island forum. Even if we assume that the
handwritten version of the CDM was created in Massachusetts and
there is no proof of that fact such a contact, standing alone,
would not be enough to overcome Rhode Island's interest in
compensating a Rhode Island company whose financial well-being
was compromised through deceptive acts of a company doing
business within Rhode Island.16
We conclude, therefore, that to the extent appellant
presents a potentially viable unfair trade practices claim, the
claim is governed by the substantive law of Rhode Island.
____________________
16Although they do not bear repeating, many of the factors
that dictate using Rhode Island law vis-a-vis appellant's
contract claim, see supra pp. 11-12, also militate in favor of
___ _____
using that law vis-a-vis its chapter 93A claim.
29
Because that is so, appellant's claim under chapter 93A is not
actionable.17 See, e.g., Eastland Bank v. Massbank for
___ ____ ______________ _____________
Savings, 767 F. Supp. 29, 35 (D.R.I.), aff'd mem., 953 F.2d 633
_______ _____ ____
(1st Cir. 1991); cf. Qantel, 740 F.2d at 70. Accordingly, we
___ ______
affirm the district court's dismissal of this claim on different,
but equally dispositive, grounds, see generally Polyplastics,
___ _________ _____________
Inc. v. Transconex, Inc., 827 F.2d 859, 860-61 (1st Cir. 1987)
____ ________________
(explaining that an appellate court, in affirming a judgment, is
not limited to the trial court's rationale, but can affirm on any
independent ground made manifest in the record), without reaching
the question of whether the alleged coverup can be said to have
been aimed at influencing Cretco "in the conduct of any [ongoing]
trade or commerce." Mass. Gen. L. ch. 93A, 2.
V. CONCLUSION
V. CONCLUSION
We need go no further.18 Finding, as we do, that
appellant mistook mere negotiations for a binding contract, and
that it has no legal recourse against ELC, we uphold the district
court's disposition of its suit.
____________________
17Appellant has not pointed to a Rhode Island counterpart to
chapter 93A, nor has it identified any theory grounded in Rhode
Island law under which its unfair trade practices claim might
prosper. We, therefore, eschew the temptation to rummage through
Rhode Island's jurisprudence. In our estimation, litigants have
an independent responsibility to do their homework.
18Our conclusion that the end product of the parties'
negotiations lacked a necessary element of contract formation,
see supra Part II(B), obviates any need to consider the lower
___ _____
court's alternative holding that the contract claim likewise
fails for want of actual damages. Similarly, our conclusion that
ELC is not liable in any way eliminates any necessity to
determine whether the lower court erred in excluding expert
testimony offered by appellant in an effort to prove damages.
30
Affirmed. Costs to appellee.
Affirmed. Costs to appellee.
________ _________________
31
Document Info
Docket Number： 93-1615
Filed Date： 3/8/1994
Precedential Status： Precedential
Modified Date： 9/21/2015