Elliott & Frantz, Inc. v. Ingersoll-Rand Co. , 457 F.3d 312 ( 2006 )

Opinions of the United
2006 Decisions States Court of Appeals
for the Third Circuit
8-11-2006
Elliott & Frantz Inc v. Ingersoll Rand
Precedential or Non-Precedential: Precedential
Docket No. 05-2403
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PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 05-2403
ELLIOTT & FRANTZ, INC.,
Appellant
v.
INGERSOLL-RAND COMPANY
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civ. No. 03-04746)
Honorable John P. Fullam, District Judge
Argued June 1, 2006
BEFORE: AMBRO, FUENTES, and GREENBERG, Circuit Judges
(Filed: August 11, 2006)
Kevin F. Berry
Thomas B. Fiddler (argued)
Cozen & O’Connor
1900 Market Street
Philadelphia, PA 19103
Attorneys for Appellant
Karen P. Layng (argued)
Andrew M. Gardner
Chad A. Schiefelbein
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street, Suite 2600
Chicago, IL 60601
Peter J. Boyer
McCarter & English
Mellon Bank Center
1735 Market Street
Suite 700
Philadelphia, PA 19103
Attorneys for Appellee
OPINION OF THE COURT
GREENBERG, Circuit Judge.
I. INTRODUCTION
This matter comes on before the court on an appeal by
plaintiff-appellant Elliott & Frantz, Inc. (“Elliott & Frantz”) from
orders of the district court entered April 1, 2005, and April 6, 2005,
granting defendant-appellee Ingersoll-Rand Company (“Ingersoll-
Rand”) summary judgment on Elliott & Frantz’s contract claims
arising out of Ingersoll-Rand’s termination of the parties’ Distributor
Selling Agreement. For the reasons set forth below, we will affirm
the orders in part and reverse in part and will remand the matter to the
district court for further proceedings.
II. FACTUAL AND PROCEDURAL HISTORY
1. The Parties and Their Agreement
Plaintiff Elliott & Frantz is an industrial construction
equipment sales and service provider incorporated under the laws of
Pennsylvania with its principal place of business in that state.
Defendant Ingersoll-Rand is a manufacturer and supplier of industrial
construction equipment incorporated under the laws of New Jersey
with its principal place of business in that state. In August 1994,
Elliott & Frantz and Ingersoll-Rand entered into a written Distributor
Selling Agreement (the “Agreement”) pursuant to which Elliott &
Frantz would have non-exclusive rights to promote, sell and service
Ingersoll-Rand equipment within a specific geographical area, referred
2
to as the “Area of Primary Sales Responsibility,” consisting of various
counties in eastern Pennsylvania and Delaware. Although the
Agreement granted Elliott & Frantz the “non-exclusive” right to
represent Ingersoll-Rand’s products within the Area of Primary Sales
Responsibility, Elliott & Frantz asserts that the parties treated the
Agreement as granting it an exclusive right.
The Agreement imposed certain responsibilities on Ingersoll-
Rand including, inter alia, the obligation to “provide sales assistance,
engineering and application advice, reasonable quantities of
advertising materials, campaigns and instruction in sales and service.”
App. at 54, ¶ 2.B. On the other hand, the Agreement required Elliott
& Frantz, inter alia, to “use its best efforts to develop business, to
promote the sale of and to sell Equipment covered by this Agreement
within its Area of Primary Sales Responsibility and [to] furnish
prompt, efficient, and courteous service.” App. at 54, ¶ 3.B.
Most relevant for our purposes, the Agreement contained a
termination provision, which read in pertinent part:
DURATION AND TERMINATION OF
AGREEMENT
A. This Agreement, unless terminated as hereinafter
provided, shall continue in full force and effect until
terminated by either party, without cause, on sixty (60)
days written notice to such effect given to the other
party.
B. This agreement may be terminated by Ingersoll-
Rand on thirty (30) days written notice to Distributor,
should the Distributor fail to satisfy the sales objectives
as prescribed by this Agreement.
App. at 56, ¶ 13.A-B. (emphasis added). The Agreement further
provided that “[the] Agreement including its attachments contains the
entire and only agreement between the parties respecting the sale to
and the purchase by the Distributor of the Equipment referred to
herein, and any representation, promise or condition not incorporated
herein shall not be binding on either party.” App. at 57, ¶ 14.B.
Finally, the Agreement provided that all questions arising under it
were to be governed by New Jersey law.
3
2. Termination of the Agreement
In July 2002, Ingersoll-Rand notified Elliot & Frantz of its
dissatisfaction with what it stated was Elliott & Frantz’s declining
performance under the Agreement. On May 12, 2003, Ingersoll-Rand
sent a letter to Elliott & Frantz terminating its distributorships in
Pennsylvania and Delaware. In particular, the termination letter read:
[P]ursuant to Section 13 of the Agreement, the
Agreement and our business relationship with respect
to the Pennsylvania counties covered by the Agreement
will terminate sixty (60) days from your receipt of this
letter. The Agreement and our business relationship
with respect to Delaware will terminate one hundred
eighty (180) days from receipt of this letter.
App. at 138. Ingersoll-Rand explained that it based its decision to
terminate the Agreement on “the continued unacceptable performance
of Elliott & Frantz and the significant decline in its overall sales and
market share with respect to [Ingersoll-Rand] products in 2002,”
which led Ingersoll-Rand to conclude that its products were “not
being adequately represented by Elliott & Frantz.” App. at 138.
3. Procedural History
In response to the termination, Elliott & Frantz commenced
this action in the Court of Common Pleas of Philadelphia County,
Pennsylvania, alleging breach of contract and breach of the duty of
good faith and fair dealing.1 Elliott & Frantz alleged that Ingersoll-
Rand breached the Agreement by terminating it without cause
inasmuch as, according to Elliott & Frantz, the parties had “by
conduct amended the [Agreement] to eliminate Ingersoll-Rand’s
ability to terminate without cause.” App. at 707, 718-19. With regard
to this purported contractual modification, Elliott & Frantz alleged
that “Ingersoll-Rand’s annual review of Elliott & Frantz, Inc.’s
performance indicated by its nature that so long as Elliott & Frantz,
Inc. performed satisfactorily, it would be permitted to continue to
have the right to sell Ingersoll-Rand products, and would not be
terminated without cause.” App. at 707. Of course, in Elliott &
1
Elliott & Frantz also alleged that Ingersoll-Rand had interfered
with Elliott & Frantz’s existing and prospective contractual relationships
but later withdrew this claim.
4
Frantz’s view it had performed satisfactorily. Elliott & Frantz also
alleged that Ingersoll-Rand further breached the Agreement by failing
to provide the service and support that the Agreement required.
Finally, Elliott & Frantz claimed that Ingersoll-Rand breached its duty
of good faith and fair dealing by, among other things, arbitrarily
terminating the Agreement, fabricating a pretext to terminate “for
cause,” and failing to reveal its corporate strategy that called for
termination of the Agreement.
Ingersoll-Rand removed the action to the district court on
diversity of citizenship jurisdictional grounds on August 18, 2003, and
thereafter filed an answer including affirmative defenses and a
counterclaim.2 During discovery, Elliott & Frantz inquired into the
factual bases explaining Ingersoll-Rand’s decision to terminate the
Agreement, and Ingersoll-Rand represented that it based its decision
on Elliott & Frantz’s unacceptable performance and decline in sales
and market share. Shortly before the scheduled trial date, Ingersoll-
Rand filed a motion for summary judgment on Elliott & Frantz’s
claims for breach of contract and breach of the implied covenant of
good faith and fair dealing, arguing principally that it had “an absolute
right to terminate [the Agreement] . . . without cause.” App. at 13,
19-20. Ingersoll-Rand further asserted that Elliott & Frantz failed to
proffer facts to support an allegation it advanced that the parties
assented to, and provided new and independent consideration for, the
purported modification of the Agreement. Finally, Ingersoll-Rand
argued that the undisputed material facts demonstrated that it fulfilled
all of its obligations under the Agreement.
Elliott & Frantz opposed Ingersoll-Rand’s motion for
summary judgment. Notably Elliott & Frantz asserted that Ingersoll-
Rand had waived its right to terminate the Agreement without cause
by failing to raise that right as an affirmative defense in its pleadings
or during discovery. On April 1, 2005, the district court conducted a
hearing on Ingersoll-Rand’s motion for summary judgment and, later
that same day, granted the motion and ordered that judgment be
entered in favor of Ingersoll-Rand on Elliott & Frantz’s claims.
2
Ingersoll-Rand asserted in its counterclaim that Elliott & Frantz
was liable for breach of contract, alleging that it had failed to pay for
certain parts it purchased under the Agreement. This counterclaim,
however, was not at issue on Ingersoll-Rand’s motion for summary
judgment and remains pending in the district court. Consequently it is
immaterial on this appeal.
5
In a subsequent Memorandum dated April 5, 2005, the district
court set forth the reasons for granting Ingersoll-Rand’s motion for
summary judgment.3 In its Memorandum, the court explained that
Ingersoll-Rand did not waive its right to advance the without cause
termination provision by failing to reference it in the termination
letter. The district court rejected Elliott & Frantz’s contract claim
predicated on the assertion that Ingersoll-Rand wrongfully had
terminated the Agreement without cause, as the court explained that
any purported modification of the Agreement to eliminate the
termination without cause provision failed for lack of consideration.
The court also rejected Elliott & Frantz’s arguments based on New
Jersey public policy aimed at preventing economic duress. Finally,
with regard to the claim for breach of the duty of good faith and fair
dealing, the district court stated that “[t]he contract calls for
reasonable support to be provided, and a reasonable jury could not
conclude that defendant failed to meet that standard,” inasmuch as
Ingersoll-Rand did not completely withdraw its contractually
obligated support.4 Thereafter, Elliott & Frantz filed a timely appeal.
3
We believe that the district court was accommodating the parties
by announcing its result on April 1, 2005, before it filed its
Memorandum, as the court had scheduled the case for trial on April 4,
2005. See also infra n.4. By announcing its result on the same day as
the hearing, the court courteously made it possible for the parties and
their attorneys to stop preparations for the trial and to reallocate the time
that they must have set aside for the trial.
4
Despite ordering the entry of judgment in favor of Ingersoll-
Rand on Elliott & Frantz’s claims in its order dated April 1, 2005, the
district court issued a second order directing entry of judgment in favor
of Ingersoll-Rand and against Elliott & Frantz dated April 6, 2005. See
supra n.3. Elliott & Frantz then appealed on April 29, 2005.
Subsequently, on June 2, 2005, the district court issued an order severing
for separate disposition Ingersoll-Rand’s counterclaim and ordering that
the court’s April 1, 2005 and April 6, 2005 orders constituted a final
judgment pursuant to Fed. R. Civ. P. 54(b). Elliott & Frantz then filed
an amended notice of appeal on June 3, 2005. In the interval between
filing its original notice of appeal on April 29, 2005, and its amended
notice of appeal on June 3, 2005, Elliott & Frantz moved for a stay in
this court of the proceedings on the appeal as it had sought clarification
from the district court as to whether the April 1, 2005 and April 6, 2005
orders were final judgments and thus were appealable. We now deny the
motion for the stay as it is moot inasmuch as we plainly have
6
III. JURISDICTION AND STANDARD OF REVIEW
The district court exercised removal diversity of citizenship
jurisdiction over this matter pursuant to 28 U.S.C. §§ 1441 and 1332,
and we have jurisdiction pursuant to 28 U.S.C. § 1291. We exercise
plenary review of the orders granting summary judgment. See
Dilworth v. Metro. Life Ins. Co., 418 F.3d 345, 349 (3d Cir. 2005);
Haugh v. Allstate Ins. Co., 322 F.3d 227, 230 (3d Cir. 2003). Thus,
we will affirm those orders if our review reveals that “there is no
genuine issue of material fact and that the moving party is entitled to
judgment as a matter or law.” Fed. R. Civ. P. 56(c). As the moving
party, Ingersoll-Rand bears the burden of proof, and we view the facts
in the light most favorable to Elliott & Frantz, the party against whom
summary judgment was sought and entered. See Dilworth, 418 F.3d
at 349; Haugh, 322 F.3d at 230. The parties agree that New Jersey
law governs, and we will decide the case on that basis principally
relying on opinions of the Supreme Court of New Jersey by which we
are bound with respect to questions of New Jersey law. See United
States v. Jefferson, 88 F.3d 240, 245 (3d Cir 1996).
IV. DISCUSSION
Inasmuch as the district court granted summary judgment in
favor of Ingersoll-Rand on Elliott & Frantz’s claims for breach of
contract and for breach of the duty of good faith and fair dealing, we
will address each claim separately.
1. Breach of Contract
a. Waiver
Initially we agree with the district court’s conclusion that
Ingersoll-Rand did not waive its argument predicated on its right to
terminate the Agreement “without cause.” To start with, Ingersoll-
Rand did not contractually waive its right to terminate the Agreement
without cause even though its termination letter did not state explicitly
that the termination was “without cause.” After all, as the district
court noted, the Agreement did not include a provision requiring a
particular form of a notification of termination. In any event, although
jurisdiction.
7
the termination letter did not cite precisely to Subsection 13.A of the
Agreement, which pertained to termination without cause, Ingersoll-
Rand did cite to Section 13 by stating that “pursuant to Section 13 of
the Agreement” the Pennsylvania distributorship would “terminate
sixty (60) days from receipt of [the] letter.” App. at 685. This
locution is significant because the 60-day notice provision was unique
to the “without cause” termination provision in Section 13.A, and thus
Ingersoll-Rand’s reference to both “Section 13" and the 60-day notice
requirement of Section 13.A undoubtedly informed Elliott & Frantz
that Ingersoll-Rand was invoking and relying upon Section 13.A.5
It is also obvious that Ingersoll-Rand was terminating the
Agreement pursuant to the “without cause” provision for the negative
reason that the Agreement provided that Ingersoll-Rand could
terminate it on 30 days notice if Elliott & Frantz did not meet the
Agreement’s sales objectives. Clearly inasmuch as Ingersoll-Rand
said that it was terminating Elliott & Frantz because of the significant
decline in its sales and market share with respect to Ingersoll-Rand’s
products, the 30-day termination provision was available to it, but
Ingersoll-Rand did not mention the 30-day termination provision in its
letter.
We also hold that Ingersoll-Rand did not waive its right to
terminate the Agreement without cause by specifying the reason for its
action in the termination letter. It seems obvious to us that even if a
party does not need cause to terminate a contract, it would be quite
surprising if it did so without what it believed was good cause
inasmuch as businesses, ordinarily at least, do not make decisions for
whimsical reasons. Thus, the real benefit to a party of having the
right to terminate a contract without cause is that it need not
demonstrate that it can justify the cause for its actions.
5
We note that the termination letter provided 180 days notice for
termination of the Delaware distributorship, but that the 180-day notice
does not correspond to Section 13.A or any other provision of the
Agreement. Counsel for Ingersoll-Rand explained at oral argument that
Ingersoll-Rand provided the 180-day notice for terminating the parties’
business relationship in Delaware in order to comply with notice
requirements imposed by Delaware law. Although the parties have not
directed our attention to the Delaware statute to which counsel referred,
our research indicates that Delaware statutory law requires a 180-day
notice for terminating a dealer’s contract. Del. Code Ann. tit. 6, § 2721
(2005).
8
We also believe that it would be remarkable to hold that in
order to preserve its rights to terminate a contract without cause, a
party is obliged to withhold the actual reason for its action from the
other party, particularly when, as here, it had had a lengthy
relationship with that party. Thus, we hardly can conceive that
Ingersoll-Rand could have preserved its right to terminate the
Agreement without cause by writing to Elliott & Frantz that “we are
terminating the Agreement without cause” but that it waived that right
by indicating why it was terminating the Agreement. We cannot bring
ourselves to believe that the Supreme Court of New Jersey which, as
we shall explain, places much emphasis on good faith and fair
dealing, would reach such a result. We hope that the obvious decline
in civility in our society has not reached such a level.
In addition, the record does not support Elliott & Frantz’s
characterization of Ingersoll-Rand’s pleadings as evidencing its
election to forego its contractual right to terminate the Agreement
without cause or that the pleadings otherwise indicated that it did not
intend to hold Elliott & Frantz to the “without cause” termination
provision. In its Answer to the complaint, Ingersoll-Rand repeatedly
denied that it surrendered the right to terminate without cause:
Paragraph No. 21:
The [Agreement] provides that it can be
terminated with cause or without cause.
Answer:
[Ingersoll-Rand] admits the allegation in this
paragraph.
Paragraph No. 22:
Subsequent to entering into the [Agreement],
the parties by conduct amended the contract to
eliminate Ingersoll-Rand’s ability to terminate without
cause. . . .
....
Answer:
9
[Ingersoll-Rand] denies the allegations in this
paragraph.
Paragraph No. 37:
Upon information and belief, Ingersoll-Rand
decided to terminate the [Agreement] for ‘cause’
because of the conduct of the parties that eliminated
the ‘without cause’ provision of the [Agreement] . . . .
Answer:
[Ingersoll-Rand] denies the allegations in this
paragraph.
App. at 707-08, 712. A person reading Ingersoll-Rand’s answer does
not need the abilities of a soothsayer to understand that Ingersoll-Rand
intended to preserve and exercise its right to terminate the Agreement
without cause.
Moreover, on the contractual waiver point, we cannot even
conceive why Ingersoll-Rand would waive its rights to terminate the
Agreement without cause at the time that it was terminating the
Agreement. The possibility that Elliott & Frantz might challenge the
termination could not have escaped Ingersoll-Rand’s consideration,
and surely it would not have intended to waive a strong legal position
with which to defend against potential litigation just at the time that it
might be useful to have a defense based on that position. In this
regard, as we explained above, the advantage of having a “without
cause” termination provision is that it relieves a party of the necessity
of justifying its action even if it believes that it has acted for good
cause.
Second, we reject Elliott & Frantz’s argument regarding
“procedural waiver” in which Elliott & Frantz urges us to treat the
contractual right to terminate the Agreement without cause as an
affirmative defense that Ingersoll-Rand waived by failing to plead in a
timely manner. Although failure to raise an affirmative defense by
responsive pleading or by appropriate motion “generally results in the
waiver of that defense,” Charpentier v. Godsil, 937 F.2d 859, 863 (3d
Cir. 1991), Ingersoll-Rand’s assertion of its contractual right to
terminate the Agreement without cause is not an affirmative defense.
On this point we observe that it is not among the affirmative defenses
10
enumerated in Fed. R. Civ. P. 8(c), and is not recognized as a “matter
constituting an avoidance or affirmative defense” under federal or
New Jersey law.6 See id.; N.J. Ct. R. 4:5-4. Rather, the right to
terminate the Agreement without cause in this case is a general
defense inasmuch as it negates Elliott & Frantz’s prima facie case for
breach of contract. See, e.g., In re Rawson Food Serv., Inc., 846 F.2d
1343, 1349 (11th Cir. 1988) (noting that a general defense, unlike an
affirmative defense, challenges whether the plaintiff has made out a
prima facie case). Accordingly, the district court correctly rejected
Elliott & Frantz’s arguments concerning waiver.
6
“Matters treated as affirmative defenses under state law are
generally treated the same way by federal courts in diversity cases.”
Charpentier, 937 F.2d at 863. While we recognize that the affirmative
defenses listed in N.J. Ct. R. 4:5-4 “were not intended to be an
exhaustive listing,” Aikens v. Schmidt, 747 A.2d 824, 827 (N.J. Super.
Ct. App. Div. 2000), Elliott & Frantz does not cite any authority, nor can
we find any, requiring that a party assert as an affirmative defense in
New Jersey a claim that a contract by its express terms could be and was
terminated without cause. In any event, in view of Ingersoll-Rand’s
express denial that the Agreement had been modified to eliminate the
without cause termination provision, we would be reaching a hyper-
technical conclusion if we held that Ingersoll-Rand waived its defense
that it had a right to terminate the Agreement without cause by not
labeling as an affirmative defense its termination of the Agreement as
being without cause. Clearly such a result would not be consistent with
Fed. R. Civ. P. 8(f), which provides that “[a]ll pleadings shall be
construed at to do substantial justice.”
We also point out, in considering Elliott & Frantz’s arguments
regarding affirmative defenses, that usually it is not likely that a general
denial of a plaintiff’s complaint would be understood as suggesting that
the defendant is raising an affirmative defense specifically set forth in
Fed. R. Civ. P. 8(c) or N.J. Ct. R. 4:5-4. For example, in an automobile
personal injury action a defendant’s denial that he was guilty of
negligence that was the proximate cause of the plaintiff’s injuries would
not suggest that the defendant intended to argue that the statute of
limitations bars the action. In such a case it is therefore appropriate that
the defendant be required to plead the statute of limitations as an
affirmative defense. Here, however, Elliott & Frantz surely should have
understood from Ingersoll-Rand’s answer that it was relying for a
defense on its right to terminate the Agreement without cause.
11
b. Termination Without Cause
In further support of its breach of contract claim, we reiterate
that Elliott & Frantz alleged that Ingersoll-Rand violated the
Agreement by terminating it without cause in contravention of an oral
modification of the Agreement supposedly eliminating Ingersoll-
Rand’s right to do so. The district court rejected this argument,
concluding that the purported modification was not supported by
consideration because “continued performance under the existing
contract . . . does not amount to fresh consideration.” Elliott & Frantz
submits that the district court erred in its analysis of the consideration
issue and that it raised genuine issues of material fact concerning the
purported modification. Elliot & Frantz further argues that New
Jersey public policy prohibited Ingersoll-Rand from terminating the
Agreement without cause in light of what it regarded was a gross
disparity in the two corporations’ bargaining power.
Under New Jersey law, parties to an existing contract, by
mutual assent, may modify their contract, and “modification can be
proved by an explicit agreement to modify, or . . . by the actions and
conduct of the parties, so long as the intention to modify is mutual and
clear.” County of Morris v. Fauver, 707 A.2d 958, 967 (N.J. 1998).7
“A proposed modification by one party to a contract must be accepted
by the other to constitute mutual assent to modify,” and, “[u]nilateral
statements or actions made after an agreement has been reached or
added to a completed agreement clearly do not serve to modify the
original terms of a contract . . . .” Id. In addition, an agreement to
modify must be based on new or additional consideration. Id.; see
also Unalachtigo Band of the Nanticoke-Lenni Lenape Nation v.
State, 867 A.2d 1222, 1230 (N.J. Super. Ct. App. Div. 2005).
Initially on the modification issue, the parties dispute whether
there was new or additional consideration supporting the purported
modification. Elliott & Frantz submits that the district court erred in
7
Ingersoll-Rand, citing the above quoted language in Fauver,
argued in its brief that a contractual modification “can only be shown by
presenting clear evidence,” Appellee’s br. at 7, and it repeated this
contention at the oral argument on this appeal. We do not read Fauver
as erecting a more stringent burden of proof in cases of modification
than otherwise might apply; however, we need not decide the issue
inasmuch as we find the modification claim fails as a matter of law
under any standard no matter how lenient.
12
concluding that its continued performance under the Agreement could
not amount to consideration sufficient to support the purported
modification. In particular, Elliott & Frantz argues that under New
Jersey law, inasmuch as the parties modified the Agreement to
eliminate Ingersoll-Rand’s ability to terminate it without cause, Elliott
& Frantz’s continued performance, which it could have discontinued
at any time without cause, constituted consideration.8 See Woolley v.
Hoffmann-La Roche, Inc., 491 A.2d 1257, 1266-67, modified on
other grounds, 499 A.2d 515 (N.J. 1985); Nolan v. Control Data
Corp., 579 A.2d 1252, 1257 (N.J. Super. Ct. App. Div. 1990)
(following Woolley). But this contention faces a possible barrier as
the Supreme Court of New Jersey seems not to have determined that
the implied employment contract analysis of Woolley, in which
consideration by performance is presumed, is applicable outside the
employment context. Ultimately, though, we need not decide the
absence of consideration question because we find that Elliott &
Frantz’s modification claim fails on other grounds.
Even when construing the record in the light most favorable to
Elliott & Frantz and drawing all inferences in its favor, as we must,
there are no facts to support a finding that the parties modified the
Agreement to eliminate the without cause termination provision, and,
absent such a modification the breach of contract claim predicated on
the termination of the Agreement must fail. In support of its argument
that the parties modified the Agreement to eliminate the “without
cause” provision, Elliott & Frantz relies primarily on testimony by a
former Ingersoll-Rand employee, Ronald Keating, to the end that
Ingersoll-Rand representatives informed Elliott & Frantz, along with
other distributors, that “as long as you remain above the national
market share average, you don’t have anything to worry about. If you
fall below, you need to be concerned.” App. at 435. Moreover,
Elliott & Frantz points out that other representatives of Ingersoll-Rand
said substantially the same thing. Of course, in deciding this appeal
we assume that the Ingersoll-Rand employees made these statements.
But contrary to Elliott & Frantz’s claim that such statements
8
Elliott & Frantz contends that it always retained the right to
terminate the Agreement without cause, and Ingersoll-Rand does not
challenge that assertion as it contends that the parties never deleted the
without cause termination provision from the Agreement. The without
cause termination provision in the Agreement allowed either party to
terminate the Agreement without cause.
13
implied a promise by Ingersoll-Rand that “[it] would only terminate
their distributorship contracts for cause,” Appellant’s br. at 10
(emphases added), plainly such representations cannot amount to a
modification eliminating Ingersoll-Rand’s express right to terminate
the Agreement without cause, and a trier of the fact could not draw a
reasonable contrary inference. Moreover, to the extent that they
related to the termination provision of the Agreement they plainly
related to Subsection 13.B., which dealt with termination by reason of
a distributor failing to satisfy sales objectives. The statements did
nothing more than explain that Subsection.
In any event, at most, the representations were unilateral
expressions of Ingersoll-Rand’s likely intent with respect to
termination of the Agreement and were explanations that if Elliott &
Frantz failed to perform adequately Ingersoll-Rand might terminate
the Agreement as Section 13.B contemplated. The expressions cannot
possibly be regarded as a relinquishment by Ingersoll-Rand of its
critical right to terminate the Agreement for any reason or for no
reason at all, as provided in section 13.A of the Agreement. They
never even touched on that right.
As an analytical matter, it is one thing to explain that a
particular circumstance, such as decline in market share, could result
in termination and quite another to agree to terminate only for that
particular reason. It is significant that Elliott & Frantz does not point
to evidence suggesting that the participants in the conversations at
issue referred to the Agreement generally or its termination provisions
in particular, or that Ingersoll-Rand represented that only a decline in
market share would trigger termination. In short, Elliott & Frantz has
not produced any evidence to show, or from which a trier of the fact
reasonably and fairly could infer, that Ingersoll-Rand made an offer to
relinquish its express right to terminate the Agreement without cause,
let alone that it made an offer to modify the Agreement to the end that
it could terminate the Agreement only by reason of Elliott & Frantz’s
having a declining market share.9
9
We are mindful of, but need not decide, the related issue of
Elliott & Frantz’s acceptance of the purported modification. New Jersey
courts require “an unqualified acceptance” to conclude the manifestation
of mutual assent; and while acceptance may be implied through conduct,
silence does not ordinarily manifest assent, particularly in cases where
the parties’ relationship and circumstances justify the offeror’s expecting
a reply. Weichert Co. Realtors v. Ryan, 608 A.2d 280, 284 (N.J. 1992).
14
In asserting its claim of modification, Elliott & Frantz’s
reliance on Woolley is misplaced. In Woolley, an employee brought a
breach of contract claim against his employer claiming that certain
express and implied promises in the employer’s personnel manual
created a contract under which the employee could not be fired at will,
but rather only for cause, and then only after the employer followed
procedures outlined in the manual. The New Jersey Supreme Court
held in Woolley that “an implied promise contained in a personnel
manual that an employee will be fired only for cause may be
enforceable against an employer even when the employment is for an
indefinite term and would otherwise be terminable at will.” 491 A.2d
at 1258 (emphases added).
But the personnel manual, the distribution of which was
deemed to constitute an offer in Woolley, stands in stark contrast to
Ingersoll-Rand’s oral statements. First, the personnel manual was a
lengthy written document distributed by the employer to a large class
of employees with the intent “that all employees be advised of the
benefits it confers.” Id. at 1260. Second, the manual contained five
full pages devoted to “termination,” which set forth the purpose and
policy of the termination section and, most notably, defined “the types
To this end, we note that the record indicates the parties did modify the
Agreement twice and in both instances did so by means of a writing
signed by both parties. Of course, we recognize that it would be
expected that Elliott & Frantz would have been happy to accept an offer
by Ingersoll-Rand to delete its right to terminate the Agreement without
cause if it had made such an offer.
Nevertheless, in view of the procedural posture of this case we
do not draw an inference against Elliott & Frantz by reason of its failure
to secure or at least, as far as we are aware, seek a written modification
of the termination without cause provision by reason of there having
been written modifications of the Agreement on the two occasions when
the parties modified the Agreement. Yet we cannot help but note that it
seems strange that if Elliott & Frantz really thought that its Agreement
had been modified, as it now contends, that it did not seek to protect its
rights by having the modification memorialized in writing. In this regard
we are aware that each party’s right to terminate the Agreement without
cause was a provision of critical importance under the Agreement. How
could it be anything less inasmuch as the provision permitted either party
to terminate the Agreement and thus end Elliott & Frantz’s
distributorship?
15
of termination,” which did not include termination without cause. Id.
As a result, the court concluded that “the policy manual represents the
most reliable statement of the terms of . . . employment.” Id. at 1265.
The same simply cannot be said for Ingersoll-Rand’s employees’
comments. Here the Agreement remained the most reliable statement
of the terms of the parties’ contractual relationship. Elliott & Frantz’s
assertion is thus simply inaccurate when it claims that Ingersoll-Rand
“made the same types of promises . . . as the defendant employer . . .
in Woolley.” Appellant’s br. at 30. On the contrary, Woolley is
starkly different, and Ingersoll-Rand’s employees’ comments fall far
short of the representations the personnel manual in Woolley
contained.
Moreover, Elliott & Frantz’s comparison to Woolley fails
outside the employment context. During oral argument counsel for
Elliott & Frantz pressed the assertion that Woolley involved the same
type of promise as here, arguing that “the only difference factually
was that [Woolley] was an employer-employee context.” Transcript
of Oral Argument at 11. In addition to counsel being incorrect about
the factual similarities, he understated the legal effect of the one
difference he concedes. The promise in Woolley was made in a
context vastly different from that here, and this distinction is critical
inasmuch as the New Jersey Supreme Court in Woolley made clear
that the context in which the promise was made in that case was
central to its holding that the personnel manual constituted an offer for
modification. Thus, the court explained that “the context of the
manual’s preparation and distribution is, to us, the most persuasive
proof that it would be almost inevitable for an employee to regard it as
a binding agreement, legally enforceable, concerning the terms and
conditions of his employment.” 491 A.2d at 1265 (emphasis added).
To the best of our knowledge, the New Jersey Supreme Court
has not applied its Woolley holding beyond the employment context
and instead has followed that case only in cases involving personnel
manuals. See, e.g., Wade v. Kessler Inst., 798 A.2d 1251, 1258-59
(N.J. 2002); Nicosia v. Wakefern Food Corp., 643 A.2d 554, 557-58
(N.J. 1994); Witkowski v. Thomas J. Lipton, Inc., 643 A.2d 546, 550-
51 (N.J. 1994). In this regard we point out that the parties have not
directed our attention to any case in which that court has applied
Woolley in a context analogous to that here. Moreover, the New
Jersey Supreme Court has limited its holding in Woolley even within
the employment context. See Shebar v. Sanyo Bus. Sys. Corp., 544
A.2d 377, 383 (N.J. 1988) (explaining that Woolley pertained to
16
established company-wide termination policies and not individual oral
promises related to employment). Elliott & Frantz does not supply us
with any reason to extend Woolley beyond the contours the New
Jersey Supreme Court delineated in that case and we decline to do so.
We also point out the startling implications of Elliott &
Frantz’s contention as it attempts to tie Ingersoll-Rand’s right to
terminate its dealership to a demonstration that Elliott & Frantz did
not maintain its sales performance at a certain level. Thus, it
necessarily follows in Elliott-Frantz’s view that if it maintained its
performance at that level Ingersoll-Rand could not terminate its
distributorship. Such a contract construction necessarily would give it
the right to maintain its distributorship for an indefinite period,
thereby hobbling Ingersoll-Rand’s ability to operate its business in the
most desirable way as circumstances changed. As a federal court
exercising diversity jurisdiction, we would be loath to apply state law
to support such a claim. Rather, if New Jersey law is to go to where
Elliott & Frantz wants it to go, the New Jersey legislature or Supreme
Court should take it there. See Leo v. Kerr-McGee Chem. Corp., 37
F.3d 96, 101 (3d Cir. 1994).
We also affirm the district court’s rejection of Elliott &
Frantz’s breach of contract claim insofar as Elliott & Frantz based it
on public policy. The case on which Elliott & Frantz bases its public
policy argument, Shell Oil Co. v. Marinello, 307 A.2d 598 (N.J.
1973), pertains to franchise practices, a type of relationship creating
legal consequences not germane in this proceeding. In point of fact,
in reaching its decision in Shell Oil, the New Jersey Supreme Court
based its public policy analysis largely on the legislative concerns
embodied in the New Jersey Franchise Practices Act, N.J. Stat. Ann. §
56:10-1 (West 2001), see 307 A.2d at 602, a statute which is not
applicable in this case and does not apply to the parties’ relationship.
Our rejection of the public policy theory is consistent with the New
Jersey Supreme Court’s rejection of similar attempts to extend the
holding of Shell Oil beyond the context of franchise agreements.
Thus, in Bak-A-Lum Corp. v. Alcoa Bldg. Prods., 351 A.2d 349, 352
(N.J. 1976), the court held that an at-will distribution agreement was
“in no sense comparable” to the franchise agreement that produced the
holding of non-terminability in Shell Oil.
Furthermore, even if we were inclined to credit Elliott &
Frantz’s characterization of New Jersey public policy as establishing
that “without cause” termination provisions are ineffective “where
17
there is grossly disproportionate bargaining power,” Appellant’s br. at
33, there is no foundation in the record on which we could anchor an
acceptance of its conclusory allegation that there is grossly
disproportionate bargaining power between the parties in this case.
Plainly, from its own representations we are constrained to conclude
that Elliott & Frantz is not a weak entity as it claims that since 1962 it
“has earned a reputation for being a top-notch distributor of industrial
and construction equipment,” maintaining numerous offices
throughout Pennsylvania, Maryland, and Delaware. App. at 367, 401-
10. Moreover, Ingersoll-Rand was concerned with the possibility that
Elliott & Frantz would distribute products competitive to those of
Ingersoll-Rand. Thus, in assessing Elliott & Frantz’s public policy
argument, this is an excellent case for us to apply the principle that
courts cannot write a better contract than the one the parties made for
themselves. See Kotkin v. Aronson, 815 A.2d 962, 963 (N.J. 2003)
(citing Kampf v. Franklin Life Ins. Co., 161 A.2d 717, 720 (N.J.
1960)).
We also point out that merely because Ingersoll-Rand is a far
larger business than Elliott & Frantz, it did not necessarily have
grossly disportionate bargaining power in their dealings. Certainly a
court must measure parties’ bargaining power in the context of the
subject matter of the bargaining at hand. For example, an individual
owning a property that a major corporation greatly needed might have
more bargaining power than the corporation in negotiations regarding
the sale of the property and could compel it to pay a price for the
property far exceeding what, in another context, would be regarded as
its market value.
In this case the material time concerning the bargaining power
of the parties was in 1994 when they entered into the Agreement
including the “without cause” termination provision. At that time, as
we already have explained, Elliott & Frantz long had been a “top-
notch distributor of industrial and construction equipment,” and had
numerous offices throughout Pennsylvania, Maryland, and Delaware.
App. at 367, 401-410. Certainly Elliott & Frantz was operating in a
major market geographic area, and it would have been useful to
Ingersoll-Rand to be represented by a distributor as successful as
Elliott & Frantz. In the circumstances, we do not understand how a
court could conclude that, in negotiating its Agreement with Ingersoll-
Rand, Elliott & Frantz was in the weaker position. Clearly Elliott &
Frantz’s position was markedly different from that of an individual
seeking to obtain a franchise from a major corporation so that he or
18
she can go into business. If Elliott & Frantz did not like the “without
cause” termination provision, the time to reject it was when the parties
negotiated the Agreement, and if Ingersoll-Rand had insisted on it
being in the Agreement, Elliott & Frantz could have declined to be its
distributor and continued on with its already successful business.
c. Failure to Provide Required Support
In addition to claiming that Ingersoll-Rand improperly
terminated the Agreement without cause, Elliott & Frantz asserted in
the district court that it failed to provide certain services and support
required by the Agreement. The district court addressed this claim
solely in the context of the good faith and fair dealing claim and
rejected it, concluding that “[t]he contract calls for reasonable support
to be provided,” and that a jury could not conclude that Ingersoll-
Rand failed to meet this standard.
The district court did not elaborate on its determination that
there were no genuine issues of material fact with respect to the level
of support provided, nor did the court explain why it was appropriate
for it on a motion for summary judgment rather than the trier of fact at
a trial, to decide whether Ingersoll-Rand provided a “reasonable”
amount of support. Yet in Richie & Pat Bonvie Stables, Inc. v. Irving,
796 A.2d 899, 906 (N.J. Sup. Ct. App. Div. 2002), the court held that
the reasonableness of a party’s reliance on a representation was a jury
question for which evidence of industry custom and usage may have
relevance. It seems to us that if reasonableness was a jury question in
that context, it should be a question for the trier of the fact, whether
the court at a bench trial or a jury, in the context here as there is a
genuine dispute of facts regarding a similar question of
reasonableness.
But there is a more fundamental problem with the district
court’s analysis on this issue. In fact, the reason we will reverse the
judgment insofar as it rejected Elliott & Frantz’s service and support
claim arises from the vagueness of the contractual language at issue.
The district court based its conclusion on the premise that the
Agreement required a “reasonable” amount of support, but the
Agreement did not say that, as the provision on that point read:
Ingersoll-Rand shall provide sales assistance,
engineering and application advice, reasonable
quantities of advertising materials, campaigns and
19
instruction in sales and service.
App. at 54, ¶ 2.B. Contrary to the district court’s suggestion that “the
contract calls for reasonable support to be provided,” the term
“reasonable” does not appear with regard to the quantity or quality of
support and services required generally and the parties used the term
“reasonable” only once to refer specifically to “quantities of
advertising materials.”
Nevertheless, Elliott & Frantz, like the district court, treats the
Agreement as calling for reasonable quantities of support and
services, including sales assistance, engineering and application
advice, and instructions in sales and service. We recognize that a
requirement that a party’s performance under a contract be
“reasonable” ordinarily would commend itself to a court. Ingersoll-
Rand, however, asserts that the Agreement “did not mandate a
quantitative level of assistance,” and consequently even minimal
amounts of support would suffice. See Appellee’s br. at 26-27. In
this case, the parties’ differing constructions of the provision
underscore its vagueness. There is notably absent from the provision
any indication that the parties agreed on how, how much, or when
Ingersoll-Rand would provide sales assistance, engineering and
application advice, campaigns and instruction in sales and service or
what level its performance would have to reach with respect to these
matters to be “reasonable,” if that is the proper measure of the
required performance. Nor is it clear what constitutes a “reasonable
quantity” of advertising materials.
As a result, the breach of contract claim based on this
provision of the Agreement was particularly ill-suited for disposition
on a motion for summary judgment. Where a contract contains vague
provisions, New Jersey courts will fill gaps or interpret missing terms
in it so as to furnish sufficiently definite meaning to the contract so
long as there is evidence that the parties intended to enter into a
bargain. Paley v. Barton Sav. & Loan Ass’n, 196 A.2d 682, 686 (N.J.
Sup. Ct. App. Div. 1964); accord Driscoll Constr. Co. v. Dep’t of
Transp., 853 A.2d 270, 276 (N.J. Super. Ct. App. Div. 2004)
(“[W]here there is uncertainty, ambiguity or the need for parol
evidence in aid of interpretation, then the doubtful provision should
be left to the jury.”); Satellite Ent. Ctr., Inc. v. Keaton, 789 A.2d 662,
667 (N.J. Sup. Ct. App. Div. 2002). In construing vague provisions,
New Jersey courts “will imply a reasonable missing term or, if
necessary, will receive evidence to provide a basis for such an
20
implication.” Satellite Ent., 789 A.2d at 667. In particular, courts
will look to, among other things, all the relevant circumstances
surrounding the transaction, as well as evidence of the parties’ course
of dealing, usage and course of performance. See, e.g., Leitner v.
Braen, 143 A.2d 256, 260-61 (N.J. Sup. Ct. App. Div. 1958) (holding
that contract for “the usual sponsorship fees” was enforceable despite
vagueness and that evidence of custom and usage “is always relevant
to make definite words which would otherwise be vague and
indefinite”); see also E. Allan Farnsworth, Contracts §§ 7.12, 7.13 at
461-76 (4th ed. 2004).
In sum, absent an understanding of just what obligations
Ingersoll-Rand undertook or at least what would be a “reasonable”
performance of its obligations, if that is the applicable standard, the
district court should not have determined that Ingersoll-Rand
adequately performed under the Agreement. Accordingly, we will
reverse the grant of summary judgment in favor of Ingersoll-Rand on
Elliott & Frantz’s breach of contract claim insofar as it rests the claim
on Ingersoll-Rand’s alleged failure to provide support and services
required under the Agreement.10
We make a final observation regarding the services and
support provision of the Agreement. We are aware that contracts
frequently have provisions similar to the service and support provision
in the Agreement, and we further recognize that our opinion on this
point might be taken as extending an open invitation to litigation
when the parties to a contract become dissatisfied with each other’s
performance. We regret these possible implications of our opinion,
but we see no escape from them because vague provisions, even if
their use in a contract cannot be avoided, invite disputes. But we
nevertheless reach our result, as applicable principles of New Jersey
law by which we are bound when coupled with summary judgment
standards require that we do so.
2. Breach of the Implied Covenant of Good Faith and Fair
Dealing
10
Unfortunately we can give no more specific guidance on the
method that the district court should use to construe the provision at
issue on the remand. Perhaps there are standards in the industry that
would be a guide. See Richie & Pat Bonvie Stables, Inc., 796 A.2d at
906.
21
The district court also rejected Elliott & Frantz’s claim for
breach of the implied covenant of good faith and fair dealing, and
Elliott & Frantz challenges that disposition. But our review of the
record satisfies us that the court correctly granted summary judgment
on this issue.
Under New Jersey law, “[e]very party to a contract . . . is
bound by a duty of good faith and fair dealing in both the performance
and enforcement of the contract.” Brunswick Hills Racquet Club, Inc.
v. Route 18 Shopping Ctr. Assocs., 864 A.2d 387, 395 (N.J. 2005);
see also R.J. Gaydos Ins. Agency, Inc. v. Nat’l Consumer Ins. Co.,
773 A.2d 1132, 1145 (N.J. 2001); Onderdonk v. Presbyterian Homes,
425 A.2d 1057, 1062 (N.J. 1981). The New Jersey legislature has
adopted the Uniform Commercial Code definition of “good faith,”
defining the term as meaning “honesty in fact and the observance of
reasonable commercial standards of fair dealing in the trade.” N.J.
Stat. Ann. § 12A:2-103(1)(b) (West 2004); see also Brunswick Hills,
864 A.2d at 395. The implied duty of good faith and fair dealing
requires that “neither party shall do anything which will have the
effect of destroying or injuring the right of the other party to receive
the full fruits of the contract.” R.J. Gaydos Ins. Agency, Inc., 773
A.2d at 1146.
The Supreme Court of New Jersey has adopted the
Restatement of Contracts explanation that “good faith performance or
enforcement of a contract emphasizes faithfulness to an agreed
common purpose and consistency with justified expectations of the
other party.” Id. (citing Restatement (Second) of Contracts § 205,
cmt. a (1981)). A plaintiff may be entitled to relief in an action under
the covenant if the defendant acts with ill motives and without any
legitimate purpose to destroy the plaintiff’s reasonable expectations.
Wilson v. Amerada Hess Corp., 773 A.2d 1121, 1130 (N.J. 2001).
However, “bad motive or intention is essential,” and “an allegation of
bad faith or unfair dealing should not be permitted to be advanced in
the abstract and absent improper motive.” Id. Thus, as we indicated
in Northview Motors, Inc. v. Chrysler Motors Corp., 227 F.3d 78, 92
(3d Cir. 2000), in a point the Supreme Court of New Jersey has
approved even though we decided the case under Pennsylvania law,
see Brunswick Hills, 864 A.2d at 399, the covenant should not be
construed “too broadly” as it “could become an all-embracing
statement of the parties’ obligations under contract law, imposing
unintended obligations upon parties and destroying the mutual
benefits created by legally binding agreements.”
22
In this case, there are no facts to demonstrate, or from which to
infer, bad motive or intention. Elliott & Frantz offers only conclusory
allegations that Ingersoll-Rand had such motives based largely on the
timing of the termination of the Agreement. However, the record
suggests just the opposite inasmuch as Elliott & Frantz concedes that
members of Ingersoll-Rand management disagreed over what was the
best course for their company and engaged in protracted internal
debate regarding corporate strategy and the costs and benefits of
utilizing company-owned stores. As the Supreme Court of New
Jersey explained in Wilson, a party does not breach the implied
covenant of good faith and fair dealing merely because its decisions
disadvantaged another party, and “contract law does not require
parties to behave altruistically toward each other.” 773 A.2d at 1130
(internal quotation marks and citation omitted). Absent bad motive or
intention, decisions a contract expressly permits which happen to
result in economic disadvantage to the other party are of no legal
significance. Id. Accordingly, if we allowed Elliott & Frantz’s breach
of the implied covenant of good faith and fair dealing claim to
proceed we would be disregarding the caveat in Wilson that such
claims under New Jersey law “should not be permitted to be advanced
in the abstract and absent improper motive.” Wilson, 773 A.2d at
1130.
In addition, the case to which Elliott & Frantz likens this
matter, Brunswick Hills, 864 A.2d 387, is distinguishable and does
not support Elliott & Frantz’s argument. The lessee-plaintiff in
Brunswick Hills sought to exercise a lease option that allowed for a
99-year renewal, and notified the landlord-defendant of its intention to
do so on numerous occasions but without realizing that it had failed to
meet all requirements for valid exercise. Despite knowing of the
plaintiff’s stated intention to exercise the lease option, “defendant,
through its agents, engaged in a pattern of evasion, sidestepping every
request by plaintiff to discuss the option and ignoring plaintiff’s
repeated written and verbal entreaties to move forward on closing the
ninety-nine year lease.” Id. at 398. The Supreme Court of New
Jersey explained that the defendant’s receipt of plaintiff’s repeated
letters and telephone calls concerning the exercise of the option
obliged the defendant to respond and to respond truthfully. Id. at 399.
The breach of the implied covenant in Brunswick Hills was “a
demonstrable course of conduct, a series of evasions and delays, that
lulled plaintiff into believing it had exercised the lease option
properly.” Id.
23
This case presents a starkly different set of facts and claims:
Elliott & Frantz does not claim Ingersoll-Rand similarly thwarted its
attempt to exercise some contractual right, let alone that it did so with
bad motive or intent. While Elliott & Frantz alleges that Ingersoll-
Rand “fail[ed] to reveal . . . its corporate strategy” of terminating the
Agreement and opting for company-owned stores, app. at 721, the
record does not contain any facts from which to infer that Ingersoll-
Rand in implementing its strategy engaged in gamesmanship similar
to that that the Supreme Court condemned in Brunswick Hills.
A more instructive precedent to consider regarding Ingersoll-
Rand’s failure to reveal its corporate strategy, and one on which
Elliott & Frantz relied before the district court, but abandoned on
appeal, is Bak-A-Lum, 351 A.2d 349, a leading case in which the
New Jersey Supreme Court considered a good faith and fair dealing
claim arising from the termination of an at-will distributorship.11 In
Bak-A-Lum, the plaintiff and the defendant entered into an exclusive
distributorship agreement, but the defendant ultimately terminated the
exclusivity provision by appointing four additional distributors. Even
though the defendant planned to terminate the distributorship and
establish other means of distributing its products, it encouraged the
plaintiff to order a large quantity of the defendant’s products for resale
and to undertake major expansion of its warehousing facilities. The
Supreme Court of New Jersey upheld the lower court’s decision
finding that the defendant breached the implied covenant of good faith
and fair dealing in its contract with the plaintiff. 351 A.2d at 352.
However, it was not the mere withholding of termination plans that
gave rise to the breach; instead, the New Jersey Supreme Court
explained that the defendant breached the covenant because it kept
silent while simultaneously encouraging the plaintiff’s substantial
investment in merchandise and facilities expansion. Id.
In this case there are no facts demonstrating or implying that
there was a comparable scenario. Even crediting Elliott & Frantz’s
allegation that Ingersoll-Rand “fail[ed] to reveal . . . its corporate
strategy” that included termination of the Agreement, the situation
here differs from that in Bak-A-Lum, as nothing in the record suggests
that Ingersoll-Rand withheld its “corporate strategy” with knowledge
Elliott & Frantz was making investments or otherwise relying to its
detriment based on an assumption of Agreement’s continuation, let
11
Elliott & Frantz did not cite Bak-A-Lum in either its opening
or reply brief in this court.
24
alone that Ingersoll-Rand induced it to expend resources while
knowing its secret “corporate strategy” called for termination of the
Agreement. Thus, Elliott & Frantz’s abandonment of its reliance on
Bak-A-Lum is telling. In sum, we cannot conclude that the record
contains any facts from which to infer that Ingersoll-Rand breached
the covenant of good faith and fair dealing.
V. CONCLUSION
For the foregoing reasons we will affirm the orders of April 1,
2005, and April 6, 2005, except to the extent that they entered
judgment for Ingersoll-Rand on Elliott & Frantz’s claim that
Ingersoll-Rand failed to provide certain services and support required
by the parties’ Agreement. To that extent we will reverse the orders
of April 1, 2005, and April 6, 2005, and we will remand the case to
the district court for further proceedings consistent with this opinion.
The parties will bear their own costs on this appeal.
25