Asia Strategic v. General Electric

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
NOV 24 1998
TENTH CIRCUIT
PATRICK FISHER
Clerk
ASIA STRATEGIC INVESTMENT
ALLIANCES, LTD.,
Plaintiff-Appellant/Cross-
Appellee, Nos. 97-3236 & 97-3259
(D. Ct. No. 95-2479-GTV)
v. (D. Kan.)
GENERAL ELECTRIC CAPITAL
SERVICES, INC. and
EMPLOYERS REINSURANCE
CORPORATION,
Defendants-
Appellees/Cross-
Appellants.
ORDER AND JUDGMENT *
Before TACHA, McWILLIAMS, and LUCERO, Circuit Judges.
Plaintiff Asia Strategic Investment Alliances (“Asia”), an Australian
corporation, sued General Electric Capital Services (“GE Capital”) and Employers
Reinsurance Corporation. (“ERC”) in the United States District Court for the
*
This order and judgment is not binding precedent, except under the doctrines of
law of the case, res judicata, and collateral estoppel. This court generally disfavors the
citation of orders and judgments; nevertheless, an order and judgment may be cited under
the terms and conditions of 10th Cir. R. 36.3.
District of Kansas for allegedly violating a business agreement between the
parties to pursue an insurance investment opportunity in China. The district court
granted summary judgment for the defendants. We exercise jurisdiction pursuant
to 28 U.S.C. § 1291 and affirm.
I. Background
In 1993, Asia executives developed an alternative way for western
companies to gain access to the heavily regulated Chinese insurance market.
They envisioned forming an insurance joint venture between western insurance
companies and the state-owned People’s Insurance Company of China (“PICC”).
The joint venture would be structured as a subsidiary of PICC, with western
companies providing capital and holding a minority interest in the subsidiary. By
taking advantage of PICC’s existing license, western companies could bypass the
Chinese government’s multi-year waiting period for new licenses. Asia believed
that the Chinese insurance market provided a good investment opportunity for
western companies.
Asia identified GE Capital, a financial services company, and ERC, a
reinsurance company and indirect subsidiary of GE Capital, as promising
investors and approached them with the PICC joint venture idea. From July 1994
through early 1995, executives from the three companies met numerous times to
discuss the proposed joint venture. GE Capital and ERC decided to end their
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involvement with the project in the Spring of 1995. Asia filed suit on October 20,
1995, alleging breach of contract and claiming $61.23 million in damages. On
February 5, 1997, Asia sought leave to amend its complaint to add a breach of
fiduciary duty claim. The motion was referred to a magistrate judge who denied
the request because it was untimely.
On January 15, 1997, after completion of discovery, the defendants moved
for summary judgment. They assumed, for the purposes of the motion only, the
existence of an agreement between the parties and argued that the relationship
was a single joint venture “to pursue and participate in the proposed joint venture
company.” Appellant’s App. at 51. Defendants asserted that the joint venture
agreement was for an indefinite period of time and was therefore, under Kansas
law, terminable at will. Defendants also argued that Asia’s damage claims were
not compensable as a matter of law.
Asia responded to the defendants’ motion by asserting that the deal actually
comprised two joint ventures: one between Asia, GE Capital, and ERC to pursue
the deal with PICC, and the second between these companies and PICC to conduct
insurance business in China. Asia argued the parties created the first joint
venture specifically to pursue an agreement with PICC, and, under Kansas law, it
was terminable only when they completed that purpose. Alternatively, Asia
argued that, under defendants’ single joint venture theory, the joint venture
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between the parties was governed by Chinese law, which limits the duration of
joint ventures to thirty years. Thus, because the joint venture had a fixed time
period, it was not terminable at will. Finally, Asia asserted that its damages were
legally compensable.
Defendants addressed Asia’s “two joint venture” theory in their reply brief,
contending that the parties’ relationship failed to meet the definition of joint
venture under Kansas law and that defendants were entitled to summary judgment
under this theory as well. Asia did not object to defendants’ argument for
summary judgment on the two joint venture theory or request leave to reply to this
argument.
The district court granted defendants’ motion for summary judgment. It
adopted the two joint venture theory and found no evidence of a first joint venture
between Asia, GE Capital, and ERC. Asia appealed, alleging four grounds for
error: (1) inadequate notice that the district court would rule on the two joint
venture theory, which defendants did not raise in their initial motion; (2) failure
of the district court to consider Asia’s claim that it had an implied contract, not a
joint venture agreement, with GE Capital and ERC; (3) the district court’s
misinterpretation of Kansas joint venture law; and (4) the inability of the
magistrate judge to rule on Asia’s motion to amend its complaint because the
ruling involved a dispositive motion.
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II. Discussion
We review the district court’s grant of summary judgment de novo,
applying the same legal standard used by the district court. See Seymore v.
Shawver & Sons, Inc., 111 F.3d 794, 797 (10th Cir. 1997), cert. denied, 118 S.
Ct. 342 (1997). Summary judgment is appropriate “if the pleadings, depositions,
answers to interrogatories, and admissions on file, together with the affidavits, if
any, show there is no genuine issue as to any material fact and that the moving
party is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). An issue
of material fact is genuine if a reasonable jury could return a verdict for the
nonmovant. See Seymore, 111 F.3d at 797. We examine the factual record and
reasonable inferences therefrom in the light most favorable to the nonmoving
party. See id.A. Inadequate Notice
It is well-settled that a district court may grant summary judgment on
grounds other than those raised in the motions as long as the nonmoving party had
adequate notice that it would have to come forward with its evidence on the issue.
See Howell Petroleum Corp. v. Leben Oil Corp., 976 F.2d 614, 620 (10th Cir.
1992); see also Celotex Corp. v. Catrett, 477 U.S. 317, 326 (1986) (noting that
“district courts are widely acknowledged to possess the power to enter summary
judgments sua sponte, so long as the losing party was on notice that she had to
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come forward with all of her evidence”); Sports Racing Servs., Inc., v. Sports Car
Club of Am., Inc., 131 F.3d 874, 892 (10th Cir. 1997) (same). Asia contends that
it had insufficient notice that the court would decide the case on the two joint
venture theory because defendants did not include the theory in their opening
brief. We find Asia had adequate notice.
Asia itself introduced the two joint venture theory in its memorandum in
support of its opposition to summary judgment. This fact distinguishes this case
from those cited by Asia where the movant raised an issue for the first time in a
reply brief, denying the nonmovant an opportunity to address the issue. Indeed,
this is a case where the “[p]laintiff may not be heard to complain that [it] did not
receive ‘an adequate opportunity to respond to [a] new issue.’” Jarvis v.
Nobel/Sysco Food Servs. Co., 985 F.2d 1419, 1424 (10th Cir. 1993) (quoting
Prospero Assocs. v. Burroughs Corp., 714 F.2d 1022, 1028 (10th Cir. 1983)
(McKay, J., dissenting)).
Asia argued that the evidence it had produced concerning the dealings
between the parties established material issues of fact regarding the existence of a
“first” joint venture. Asia’s submitted voluminous evidence consisting of
thousands of pages of documents and transcripts. Because Asia based its case on
the two joint venture theory and produced its evidence accordingly, we find that
Asia had ample notice and opportunity to come forward with its evidence on this
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theory. See Howell Petroleum, 976 F.2d at 620 (holding plaintiff had notice of
issue when plaintiff implicitly raised it in motion for partial summary judgment
and defendant responded with winning argument); cf. Sports Racing Servs., 131
F.3d at 892-93 (suggesting that, where moving party mistakenly interpreted
franchise law requirements in its motion for summary judgment, nonmoving party
had notice that application of the law was in question, and court’s ruling based on
the correct interpretation was therefore proper); Madewell v. Downs, 68 F.3d
1030, 1048 (8th Cir. 1995) (finding nonmovant had notice that Rule 12(b)(6)
motion would be converted to Rule 56 motion when he offered materials outside
the pleadings in response to a 12(b)(6) motion). In addition, we find the parties
have fully developed the facts in this case and that Asia suffered no prejudice.
Thus, the district court appropriately granted summary judgment on the two joint
venture theory. See Wilder v. Prokop, 846 F.2d 613, 626 (10th Cir. 1988)
(finding district court ruling against nonmoving party on claim arguably not
raised in summary judgment motions proper because facts were fully developed
and the nonmoving party suffered no prejudice). We find the district court
committed no procedural error by basing its ruling on the two joint venture
theory.
B. Asia’s Claim of Implied Contract
Appellants argue the district court erred by failing to decide whether an
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implied contract existed between the parties. Asia may have arguably raised the
simple “implied contract” argument in its initial complaint and in the pretrial
order. However, Asia failed to raise the implied contract theory in its
memorandum in support of its opposition to defendants’ motion for summary
judgment. In opposing summary judgment, Asia alternatively relied on the “two
joint venture” theory and the “one continuing joint venture” theory. It never
argued on summary judgment that the agreement with GE Capital and ERC
constituted a simple contract. Instead, it consistently referred to the parties’
alleged agreement as one for a joint venture.
Appellate courts will not consider points raised below but not argued or
pursued in the district court, except in cases involving jurisdiction, sovereign
immunity, manifest injustice, or other exceptional circumstances. See, e.g.,
Rademacher v. Colorado Ass’n of Soil Conservation Dists. Med. Benefit Plan, 11
F.3d 1567, 1571-72 (10th Cir. 1993); Lyons v. Jefferson Bank & Trust, 994 F.2d
716, 721-22 (10th Cir. 1992). Underlying this rule are serious concerns about
finality of judgments and judicial economy. See Okland Oil Co. v. Conoco Inc.,
144 F.3d 1308, 1314 n.4 (10th Cir. 1998); Lyons, 994 F.2d at 721. The rule
applies not only to the failure to raise issues at trial, but also the failure to raise
issues on summary judgment or in opposition to a motion for summary judgment.
See Geoffrey E. Macpherson, Ltd. v. Brinecell, Inc., 98 F.3d 1241, 1246 (10th
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Cir. 1996); Rademacher, 11 F.3d at 1571.
Asia’s failure to press its implied contract theory at the summary judgment
stage precludes it from asserting that claim now. Even construing Asia’s
summary judgment filings generously, we find no direct reliance on the simple
implied contract theory. The best we can say is that the implied contract
argument lurks somewhere beneath the surface of Asia’s memorandum. However,
“vague, arguable references to [a] point in the district court proceedings do not . .
. preserve the issue on appeal.” Lyons, 994 F.2d at 721 (quoting Monarch Life
Ins. Co. v. Elam, 918 F.2d 201, 203 (D.C. Cir. 1990). In addition, the fact that
Asia may have raised the issue in its complaint or could have argued it at trial is
not dispositive. Failure to raise an issue on summary judgment constitutes waiver
of that issue. See Grenier v. Cyanimid Plastics, Inc., 70 F.3d 667, 678 (1st. Cir.
1995) (“Even an issue raised in the complaint but ignored at summary judgment
may be deemed waived.”); Vaughner v. Pulito, 804 F.2d 873, 877 n.2 (5th Cir.
1986) (“If a party fails to assert a legal reason why summary judgment should not
be granted, that ground is waived and cannot be considered or raised on appeal.”);
Lazarra v. Howard A. Esser, Inc., 802 F.2d 260, 269 (7th Cir. 1986) (“A
contention included in an answer, but not pressed before the district court, may
not be presented on appeal as a ground for reversal.”). We find this case does not
present the kind of manifest injustice or other exceptional circumstances that
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would excuse Asia’s waiver. Thus, we will not review the merits of its implied
contract claim.
C. Joint Venture
The district court found that, under Kansas law, no evidence supported the
existence of a joint venture agreement between Asia, GE Capital, and ERC. Asia
asserts that the district court erred in its interpretation of Kansas joint venture law
and that, under the correct legal standard, there is sufficient evidence for a
reasonable jury to find the existence of a joint venture.
Kansas law defines a joint venture as “an association of two or more
persons or corporations to carry out a single business enterprise for profit; it may
be found in the mutual acts and conduct of the parties.” Modern Air
Conditioning, Inc. v. Cinderella Homes, Inc., 596 P.2d 816, 823 (Kan. 1979); see
also George v. Capital S. Mortgage Invs., Inc., 961 P.2d 32, 44 (Kan. 1998);
Goben v. Barry, 676 P.2d 90, 96 (Kan. 1984). Kansas law does not define
precisely the requirements of a joint venture. Instead, it merely lists various
factors, none of which is singularly controlling, that are indicative of a joint
venture. See Modern Air Conditioning, 596 P.2d at 823. These factors are:
(1) the joint ownership and control of property; (2) the sharing of expenses,
profits and losses, and having and exercising some voice in determining the
division of the net earnings; (3) a community of control over and active
participation in the management and direction of the business enterprise;
(4) the intention of the parties, express or implied; and (5) the fixing of
salaries by joint agreement.
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Id.
Asia contends that the negotiations and meetings of the parties between
July and December of 1994 created an implied agreement to operate as a joint
venture, and it cites various facts that it claims provide enough evidence for a
reasonable jury to conclude a joint venture was formed. Asia’s facts are as
follows: (1) GE Capital and ERC asked for and received a ninety day exclusivity
agreement from Asia at the end of July 1994; (2) Asia funded all project efforts
during the period in question; (3) ERC agreed, at a November 3, 1994 meeting, to
begin funding Asia’s expenses, provided Asia could arrange a meeting between
ERC and a high-level PICC official to satisfy ERC that PICC was serious about
its support for the project; (4) Asia prepared and presented to ERC a detailed
business plan which ERC then forwarded to PICC along with a letter expressing
ERC’s and GE Capital’s commitment in principle to the project; (5) the business
plan provided for Asia to have an equity share of the insurance joint venture; (6)
Asia, ERC, and GE Capital discussed strategy and kept each other apprised of
their dealings regarding the project; and (7) each party contributed something
different to the deal. Even taking all this evidence as true and viewing it in the
light most favorable to Asia, we agree with the district court that a reasonable
jury could not have found the existence of a joint venture under Kansas law.
The record indicates that, even if the parties had formed an agreement to
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work toward the insurance joint venture, that agreement did not itself constitute a
joint venture. Applying the Modern Air Conditioning factors, there was no joint
ownership or control of property, nor was there joint fixing of salaries. In
addition, the parties did not share expenses. Asia admits that it funded all project
efforts, and ERC’s November 3 agreement to fund Asia’s future expenses was, in
Asia’s own words “subject to [ERC] being satisfied of the serious intent of PICC
to support the insurance joint venture.” Appellant’s Addendum at 39. Asia
arranged for a meeting with a PICC official on December 5, 1994, but after that
meeting, ERC was not sufficiently satisfied to commit to the cost sharing, as it
indicated in a January 17, 1995 letter to Asia. GE Capital and ERC broke off
further discussions with Asia soon after this letter. Because of the conditions set
forth at the November 3 meeting, the parties clearly had no agreement to share
expenses prior to the December 5 meeting with the PICC official. Furthermore,
ERC’s actions suggest that it never agreed to share expenses after the December 5
meeting either. Even if we give Asia the benefit of the doubt and find an
agreement to share expenses after the December 5 meeting, this by itself is not
enough to establish a joint venture. See PulseCard, Inc. v. Discover Card Servs.,
Inc., 917 F. Supp. 1478, 1485 (D. Kan. 1996) (finding that sharing of expenses
alone will not suffice to establish a joint venture between parties to a business
contract).
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Asia also provides no evidence of agreement to share profits and losses or
of joint participation in the management and direction of the business enterprise.
In fact, there were no profits to be had from the alleged first joint venture because
its objective was simply the pursuit of a second joint venture. As for the
management of the alleged business venture, the record shows that the parties
discussed strategy, but we find no indication of joint decisions other than the
November 3 decision to pursue a meeting with PICC and the November 3 letter
from ERC to PICC expressing commitment in principle to the project. We hold
that this evidence is inadequate to prove the existence of a joint venture.
Perhaps most importantly, we find insufficient evidence of the intent of the
parties to form a joint venture. Asia theorizes that we must infer intent from the
actions of the parties. However, those actions indicate negotiations, not
agreement. No actions of the parties prior to November 3 can reasonably be
construed as creating a joint venture. The initial meetings, exclusivity agreement,
and efforts by both sides to keep the other informed are the kind of actions parties
typically take in evaluating and negotiating a potential business deal. Asia
contends that the November 3 meeting, ERC’s conditional agreement to fund
Asia’s efforts, ERC’s approval of the business plan, 1 and its letter to PICC show
1
We note that the business plan only addressed the second joint venture with PICC,
not the alleged first joint venture with Asia.
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an agreement. We disagree. Although support for a proposal and a commitment
in principle may show ERC’s interest in the project, they hardly evidence an
agreement to go forward in a joint venture relationship with Asia.
When we construe the evidence in the light most favorable to Asia, we find
that, at best, the parties might have legally agreed to pursue the insurance joint
venture and to ERC’s payment of Asia’s costs after December 5, 1994. No
reasonable jury could find this agreement rose to the level of a joint venture. In
the absence of any joint ownership, sharing of profits, joint management of the
enterprise, fixing of salaries, and clear intention of the parties, we find no error in
the district court’s grant of summary judgment. See Southwest Nat’l Bank of
Wichita v. ATG Constr. Management., Inc., 736 P.2d 894, 897 (Kan. 1987)
(upholding trial court’s finding that no joint venture existed between bank and
general contractor where parties did not agree to share property ownership or
profits); Flight Concepts Ltd. Partnership v. Boeing Co., 38 F.3d 1152, 1158
(10th Cir. 1994) (applying Kansas law and affirming summary judgment on the
grounds that no joint venture was formed where parties did not jointly own
property, fix salaries, share expenses or control of the project); Nature’s Share,
Inc. v. Kutter Prods., Inc., 752 F. Supp. 371, 383 (D. Kan. 1990) (granting
summary judgment motion and finding no joint venture where parties to business
contract had no agreement to share profits).
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D. Motion to Amend the Pleadings
Finally, Asia claims that the assignment of its February 5, 1997 Motion for
Leave to Amend Complaint to a magistrate judge constitutes reversible error
because the motion was dispositive and therefore beyond the magistrate’s
jurisdiction as set forth in Federal Rule of Civil Procedure 72 and 28 U.S.C. §
636(b)(1)(A). The magistrate denied Asia’s motion, and Asia filed no objection
to the ruling with the district court. Asia’s argument is foreclosed by this court’s
rule that failure to timely object to a magistrate’s authority constitutes waiver.
See In re Griego, 64 F.3d 580, 583 (10th Cir. 1995); Clark v. Poulton, 963 F.2d
1361, 1366-67 (10th Cir. 1992). 2 In Clark, this court determined that a
magistrate’s “jurisdiction” to hear a case was not the same as nonwaivable subject
matter jurisdiction and that objections to this jurisdiction are waived if not
properly raised with the district court. See 963 F.2d at 1367. Asia admits that it
made no objection to the district court. Therefore, Asia has waived its right to
2
Asia erroneously relies on Clark v. Poulton, 914 F.2d 1426 (10th Cir. 1990), to
support its contention that magistrate jurisdiction is nonwaivable. That decision was
vacated and replaced by the current rule in Clark v. Poulton, 962 F.2d 1361 (10th Cir.
1992).
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raise the issue of the magistrate’s authority before this court.
AFFIRMED.
ENTERED FOR THE COURT,
Deanell Reece Tacha
Circuit Judge
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