USA MacHinery Corp. v. CSC, Ltd.

Opinions of the United
1999 Decisions States Court of Appeals
for the Third Circuit
7-16-1999
USA Machinery Corp v. CSC LTD
Precedential or Non-Precedential:
Docket 98-3282
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Filed July 16, 1999
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 98-3282
USA MACHINERY CORPORATION,
a Pennsylvania Corporation
v.
CSC, LTD., an Ohio Corporation;
ALGOMA STEEL INC., an Ontario Corporation
USA Machinery Corporation,
Appellant
On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. No. 96-cv-01768)
District Judge: Hon. Alan N. Bloch
Argued February 8, 1999
Before: SLOVITER, ROTH and STAPLETON, Circuit Judges
(Filed July 16, 1999)
Jarrell D. Wright (Argued)
Christopher R. Opalinski
Eckert, Seamans, Cherin & Mellott
Pittsburgh, PA 15219
Attorneys for Appellant
Craig W. Jones (Argued)
Reed, Smith, Shaw & McClay
Pittsburgh, PA 15219
Attorney for Appellee
CSC, Ltd., an Ohio Corporation
Michael J. Betts (Argued)
Renee A. Metal
Betts Law Offices
Pittsburgh, PA 15238
Attorneys for Appellee
Algoma Steel Inc., an Ontario
Corporation
OPINION OF THE COURT
SLOVITER, Circuit Judge.
I.
USA Machinery Corporation ("USA") appeals the District
Court's order granting judgment as a matter of law in favor
of CSC, Ltd. ("CSC") and Algoma Steel, Inc. ("Algoma").
USA's seven-count complaint raised claims of breach of
contract, tortious interference with contract, unjust
enrichment, promissory estoppel, and fraud. On appeal,
USA presses only the claims asserted in the first, second,
and fifth counts of its complaint: those alleging breach of
contract and unjust enrichment on the part of both
defendants.
This case arises from the efforts of USA, and in particular
its president, Robert Hughes, to act as a broker for the sale
of an assemblage of steel-making equipment, a "continuous
caster,"1 from Algoma to CSC. When Algoma sold the
equipment to CSC directly, USA sued the two companies in
the United States District Court for the Western District of
_________________________________________________________________
1. Hughes described a caster as follows:
[I]t includes a multitude of pieces of equipment and it includes
nine
bridge cranes, nine ladles, transfer cars, ladle met[sic] station,
and
the caster. All of that equipment is several hundred tons. It would
probably take up, my guess would be, two or three times this room
size of boxes of equipment, and that's not saying how big it would
be after it is assembled.
App. at 81.
2
Pennsylvania. Trial commenced on April 13, 1998. At the
close of plaintiff's case, the District Court, on defendants'
motions under Federal Rule of Civil Procedure 50, ruled
from the bench that USA failed to present sufficient
evidence to reach the jury on its claims of breach of
contract and unjust enrichment, and entered judgment as
a matter of law. For the following reasons, we will affirm.
II.
Counts one and two of the complaint, the breach of
contract claims against Algoma and CSC, allege that USA
had contracts with each defendant, which defendants
breached by dealing directly with each other rather than
through USA. Specifically, USA alleges in count one that
"CSC and USA Machinery entered into a contract under
which CSC was obligated to deal with Algoma exclusively
through USA Machinery and was obligated to pay to USA a
finder's fee upon closure of the CSC-Algoma transaction."
App. at 15. Similarly, with respect to Algoma, count two
states that "Algoma and USA Machinery entered into a
contract under which Algoma was obligated to deal with
CSC exclusively through USA Machinery and was obligated
to pay USA Machinery a finder's fee upon closure of the
CSC-Algoma transaction." App. at 16.
USA's unjust enrichment claim is set forth in countfive
of the complaint. This count states, in pertinent part:
USA Machinery supplied information and services to
Defendants, and therefore conferred a substantial
value and benefit upon Defendants.
At all times relevant hereto, Defendants were aware
and acknowledged that USA Machinery was supplying
information and services with the expectation of
receiving compensation therefor.
USA Machinery has not been paid for its services or
for the value and benefit it conferred upon Defendants.
It would be unjust and inequitable for Defendants to
retain the value and benefit conferred upon them by
USA Machinery without compensation therefor.
3
Ohio App. at 18 (allegation numbers omitted).
We review the record in a light most favorable to USA.
See Lightning Lube, Inc. v. Witco Corp., 4 F.3d 1153, 1166
(3d Cir. 1993). At trial, USA rested its case on the
testimony of one witness, Hughes, and a number of
documents introduced through Hughes's testimony.
Hughes testified that USA is principally in the business
of "buying and selling and brokering used steel mill
equipment." App. at 80. Some 80% of USA's business
consists of brokering sales of steel mill equipment, and 20%
consists of selling equipment that USA owns. As Hughes
testified, "brokerage" deals were structured either as (1)
direct purchases between the buyer and the seller, with all
parties having agreed to a fee to be paid to USA, or (2)
"spread" transactions whereby USA consummates two
transactions simultaneously -- a purchase by USA of the
equipment from the seller and a concomitant sale from USA
to the buyer, with USA's profit consisting of the difference
in price between the two transactions.
Hughes testified as follows regarding the structure of
transactions in his business:
It is customary in our business that no agreement is
made until the end. The written agreement is the
purchase order. I have been doing it for 30 years, it's
never been different. We never enter into binding legal
contracts other than the purchase order which says, I
agree to purchase the equipment, and we offer -- you
know, it depends on the structuring of the deal, but
that's the end of the deal. That's when the contract is
put down on paper as to exactly the scope of the
purchase.
App. at 93.
When he was then asked what was agreed upon at the
outset of such deals, Hughes responded:
What we agree on at the outset of the deal is that
when we are brokering equipment, we get the buyer of
the equipment to agree that, look, we are here to
service you, we are here to find equipment for you, but
in return once I find equipment for you, you're going to
4
deal with me and purchase it and you are not going to
go around me once I find it for you and try to buy it
direct.
From the seller, the seller agrees if I bring him a
customer, a customer he does not have, I'm giving him
the opportunity to have a sale, he agrees not to deal
directly with my customer and have any
communication with my customer so I can
consummate a deal. That's the agreement we usually
have at the end of the deal.
App. at 94.
With respect to the transaction at issue in this case,
Hughes testified that on November 25, 1995, he attended a
meeting at CSC with Dan Stefano, a representative of CSC,
at which Stefano related CSC's intention to construct a new
melt shop facility -- a facility for the melting and refining of
scrap steel. At the end of the discussion, Stefano stated
"that he would be interested in any piece of used equipment
that would fit any of the equipment needs that they had for
this new project." App. at 130. The following day, Stefano
told Hughes that CSC was in need of ladles, and Hughes
related that he found some ladles that might be of interest
to CSC. On November 28, 1995, Hughes sent Stefano
information on the ladles. App. at 279. There was no
communication between CSC and USA for approximately
five months following this meeting. App. at 133.
In April 1996, Stefano contacted Hughes by telephone
and introduced him to Tony Wilson, the director of CSC's
plan for expanding its facility. App. at 134. During this
conversation, Wilson indicated that CSC was interested in
finding used equipment for its expansion project,
specifically an electric arc furnace. Id. On April 30, 1996,
Hughes forwarded a letter and accompanying information
about a furnace of this kind to Wilson. Shortly thereafter,
Hughes met with Wilson at CSC's office in Ohio, where the
two discussed the arc furnace and the possibility of Hughes
finding other equipment for CSC. When Hughes was asked
by his counsel whether a caster was referred to in these
discussions, Hughes replied that "I am sure it was
discussed, but I don't recall right now." App. at 139.
5
On May 17, 1996, Wilson visited USA's office in
Pennsylvania; at this meeting Wilson reviewed information
that Hughes had on various pieces of equipment, including
the arc furnace. App. at 141-42. CSC ultimately never
purchased the arc furnace that Hughes had found.
At this time, USA was also doing business with Algoma,
from which it had bought used equipment in the past. On
June 26, 1996, Hughes went to Algoma's facility in Sault
Ste. Marie, Ontario to inspect and finalize its purchase of a
"bridge crane trolley" that it later resold in what Hughes
described as a "spread" transaction. App. at 145-46. In the
course of his visit, Hughes met with Bill Tucker and Paul
Logan of Algoma. Logan led Hughes on a tour of the facility
during which the two discussed used equipment that
Algoma might be willing to sell, and Logan mentioned that
Algoma had a caster that was not being used. App. at 147-
48. Hughes then met with Tucker again and asked Tucker
about the caster. Tucker responded that it was not
presently for sale, but when Hughes stated that he had "a
customer who may be interested in this caster," Tucker
stated that "we would be very interested in any customer
that you would have for the caster." App. at 148. No sale
price for the caster was discussed at this or any
subsequent meeting with Algoma officials. App. at 149.
According to Hughes's testimony on cross-examination,
Hughes did not initiate any communication with CSC
regarding the Algoma caster after he returned to
Pennsylvania following his trip to Algoma's facility. App. at
225-26. According to Hughes's direct testimony, he never
discussed with CSC the possibility of an exclusive contract
with USA for the purchase or sale of any caster. Nor did he
discuss an exclusive arrangement with Algoma whereby
USA had the exclusive right to sell Algoma's caster. App. at
159-60.
On July 8, 1996, Al Zalner of CSC called Hughes,
explaining that he was now the official charged with the
responsibility of overseeing CSC's expansion effort. Zalner,
like Wilson, told Hughes that CSC was interested infinding
any used equipment that would suit the company's needs.
App. at 150. When Hughes asked Zalner if CSC would be
interested in finding a used caster, Zalner replied that the
6
company had been searching for one but had given up.
App. at 151. Hughes then informed Zalner that he had
found one and Zalner asked Hughes to "get me as much
information as you can." App. at 151. The conversation
then turned to the nine ladles that had been previously
discussed. When Zalner asked where the ladles were
located, Hughes responded that he "could not divulge the
location of the ladles until [he] registered CSC as his
customer," when he would be "glad to give [Zalner] the
information and location." App. at 153. Hughes testified
that Zalner responded by saying "okay." App. at 153.
Hughes also testified that he informed Zalner that the
manufacturer of the caster was Voest Alpine. App. at 168.
Hughes then called Tucker at Algoma informing him that
USA had a customer that was interested in inspecting the
ladles. Hughes further stated that he wanted to "register"
the customer as USA's customer. Tucker reportedly stated
"yes, we accept your registration." App. at 156. When
Hughes was pressed by both counsel and the court on the
issue of whether the caster was discussed in this
conversation, Hughes responded in the affirmative, but
gave no indication of the nature of that discussion. App. at
154-55. After this conversation, Hughes wrote to Tucker
stating: "As discussed we have a customer interested in
purchasing your nine 95 ton ladles. Our customer asked us
to divulge the location so that they can make arrangements
for an inspection. We now wish to register our customer
with you for protection. Our customer is CSC . . . . Should
our customer contact you directly or indirectly please ask
them to make all inquiries through USA Machinery
Corporation." App. at 282. The letter made no mention of
the caster. Hughes did not send a comparable letter to
CSC.
Hughes then had several conversations with Logan at
Algoma in which Hughes requested information about the
caster. On July 11, 1996, Hughes sent Zalner at CSC a
letter containing information on the caster. The letter
described the caster as including a "ladle turret" and
possibly "some bridge cranes." There is no mention of ladles
being part of the caster unit in the letter. The letter
continued: "This equipment is not currently on the market
7
for sale. However, it is possible that an agreement to sell
can be reached in the future. If you are interested, I
suggest that we inspect the caster and at that time we can
discuss some of the parameters of your interest and the
owner's future plan." App. at 285.
Hughes testified that "right around" July 11, he had a
phone conversation with Zalner in which Hughes informed
Zalner that the owner of the caster was Algoma. Zalner
responded, "yes, I know that the caster is at Algoma." App.
at 168. When Hughes then asked Zalner how he knew,
Zalner replied that he had called Voest Alpine, the
manufacturer, who informed Zalner of the owner. Hughes
then said to Zalner, "you're just operating on my
information," to which Zalner replied, "yes, you're right."
App. at 168-69. On July 12, Hughes sent Zalner a letter
describing the caster and several associated pieces of
equipment. The letter also stated that "this equipment is
made to be used with the 95 ton ladles we have been
discussing." The letter closed stating, "I am looking forward
to our site inspection at which time we can discuss the
pertinent variables which effects [sic] a project of this size."
App. at 286.
From July 12 to July 18, Hughes had several
conversations with Zalner in which Zalner repeatedly asked
Hughes to get more information about the caster. During
this period, Hughes attempted to arrange a site inspection
for CSC at Algoma. After receiving a drawing of the caster
from Algoma on July 19, Hughes delivered the drawing to
Zalner. On July 22, Hughes called Zalner to ask whether he
was ready to go to Algoma to inspect the equipment. Zalner
responded by telling Hughes that he was going to Algoma
on July 24, having already "made arrangements with
Algoma." App. at 180-81. In a phone conversation later the
same day between Hughes, Zalner, and Tom Fisher of CSC,
Hughes complained that CSC was circumventing him.
Hughes related the reaction of Zalner and Fisher thus:
"Basically they said to me that although I had found the
caster for them -- and they freely admitted that I was the
one that found the caster -- that if I had a commission due,
my problem was to go to Algoma and they had no contract
with me . . . ." App. at 181-82.
8
Hughes then called Tucker at Algoma, complaining that
Algoma was dealing directly with USA's customer despite
the registration letter. According to Hughes, Tucker
responded "that it was basically out of his hands." Hughes
went on to relate that Tucker told him "[t]hat corporate had
made a decision that because my registration letter was not
signed by Algoma they felt justified in not honoring. And
that although he felt that they were going to give me
protection on the ladles that it was corporate's stance that
because there was no signature, there was nothing I could
do about it and it was my tough luck." App. at 183-84. The
following month, on August 23, 1996, Algoma sold the
caster and associated equipment, including the ladles, to
CSC for $5 million.
As previously noted, the District Court ruled that the
evidence presented through Hughes's testimony was not
sufficient to create a jury issue either on USA's contract
claims or its claims of unjust enrichment, and, accordingly,
granted judgment as a matter of law in favor of CSC and
Algoma. Our standard of review is plenary; judgment as a
matter of law is appropriate only "if, viewing the evidence in
the light most favorable to the nonmovant and giving it the
advantage of every fair and reasonable inference, there is
insufficient evidence from which a jury reasonably could
find liability." Lightning Lube, Inc., 4 F.3d at 1166.
III.
At the outset, we must make two observations. First,
although USA's complaint raised numerous causes of
action, USA appears only to press its breach of contract
and unjust enrichment claims although none of the other
causes of action were dismissed prior to trial. During the
colloquy after defendants moved for judgment as a matter
of law, the court asked USA what theories of recovery it
contemplated, and its counsel responded that there were
"at least two" and then advanced the contract and unjust
enrichment claims. After oral argument, the court granted
judgment as a matter of law on all claims against CSC and
Algoma; there was no further discussion of any of the other
claims alleged in the complaint. App. at 269-276. On
appeal, USA presses only its claims of contract and unjust
9
enrichment. Accordingly, it appears that all other claims
were abandoned, and our discussion will be confined to the
claims discussed by the parties.
Second, despite the interstate, and indeed international,
nature of the putative transactions at issue, the parties
have not chosen to address choice-of-law issues. Algoma
mentions, in a footnote, that "USA assumes that
Pennsylvania substantive law applies in this diversity case,
and Algoma agrees." Appellee Algoma's Brief at 16 n.7.
Because the parties appear to be in agreement on this
issue, we will assume, without deciding, that Pennsylvania
law supplies the appropriate substantive rules.
A.
USA argues first that the District Court misapplied the
law in ruling that there was no evidence to support a
contract between USA and CSC or between USA and
Algoma. The parties agree that "the test for enforceability of
an agreement is whether both parties have manifested an
intention to be bound by its terms and whether the terms
are sufficiently definite to be specifically enforced." ATACS
Corp. v. Trans World Communications, Inc., 155 F.3d 659,
665 (3d Cir. 1998) (internal quotation marks omitted).
Hence our task in reviewing the District Court's grant of
judgment as a matter of law is to examine the record to
determine whether the evidence would support a jury's
finding that the parties to the two putative contracts
expressed their mutual intent to be bound to terms that are
sufficiently definite to be enforced.
However, USA offered no evidence that is consistent with
the type of contract alleged in the complaint, i.e., that both
CSC and Algoma agreed to pay USA a "finder's fee" upon
the completion of any transaction. USA has not pointed to,
and we have not found in the record, any testimony or
documents suggesting such an agreement. In fact,
notwithstanding the complaint, USA's brief states that it
"did not contend or attempt to prove at trial that the parties
had a fully-formed and detailed agreement with regard to
the final purchase and sale of the caster and thefinal
payment for USA's services." Appellant's Brief at 17. Indeed,
10
Hughes testified that he never had any conversations with
Zalner at CSC about a fee for his services, whether
connected to the ladles or the caster, App. at 209; that he
could not specify whether he expected that he would be
paid in the form of a lump sum, a percentage, or a "spread"
because "[CSC and Algoma] cut us out of the deal before we
got to specifics," App. at 194; and that there was ordinarily
no contract until the final consummation of a sale, App. at
93.
We have previously stated in the brokerage context that
"a broker cannot recover a commission, even though he
brought the seller and buyer together, unless he can prove
a contract of employment, express or implied, oral or
written, between himself and the buyer (or seller) or an
acceptance and ratification of his acts by the buyer (or
seller)." Christo v. Ramada Inns, Inc., 609 F.2d 1058, 1061
(3d Cir. 1979) (internal quotation marks omitted).
Consequently, there is insufficient evidence in the record,
when viewed most favorably toward USA, upon which a
jury could reasonably base a conclusion that USA had an
agreement with either or both of the defendants under
which any sale of equipment from Algoma to CSC would
yield a fee for USA.
On appeal, USA advances a different theory for its
contract claim: not that there were contracts by which the
defendants agreed to pay it a finder's fee but that the
agreements between the parties were "in the nature of
agreements to negotiate in good faith." Appellant's Brief at
16. Further, USA argues, these agreements involved
promises on the part of CSC and Algoma "to deal with one
another exclusively through USA and to pay USA a
reasonable fee if a transaction was later finalized."
Appellant's Brief at 18.
We are unpersuaded. To be sure, we have held, under
Pennsylvania law, that an agreement to negotiate in good
faith can be enforceable under certain circumstances. See
Channel Home Centers, Div. of Grace Retail Corp. v.
Grossman, 795 F.2d 291, 298-99 (3d Cir. 1986). However,
our holding in that case was predicated on several
circumstances that are not present here. In Channel Home
Centers, the putative agreement between a commercial
11
property owner and a prospective lessee whereby the owner
agreed to withdraw a property from the market during
negotiations for a lease was embodied in a "detailed" letter
of intent signed by both parties. Id. at 292. We found an
"unequivocal promise" in the language of the letter, which
stated: "[t]o induce the Tenant [Channel] to proceed with
the leasing of the Store, you [Grossman] will withdraw the
Store form the rental market, and only negotiate the above
described leasing transaction to completion." Id. at 299.
Our conclusion that the parties intended to be bound by
the letter was supported by the preparation of a draft lease,
architectural planning, zoning applications, and
correspondence and telephone conversations. Id.
This case, by contrast, does not present similar indicia of
intent to be bound, as there is no "detailed" expression of
the parties' intent. In the case of CSC, the record shows
that Hughes informed Zalner that USA wished to "register"
CSC as its customer during a discussion about the nine
ladles that Algoma owned, and that Zalner said "okay."
App. at 153. There was no discussion of what "registration"
entailed, and Hughes acknowledged that he never used the
term "exclusive" in his negotiations with CSC. App. at 209.
He also acknowledged that USA had never previously
consummated a transaction with CSC. Unlike the situation
in Channel Home Centers, there were also no extensive
preparations. Hughes merely supplied CSC with some
information about the caster at CSC's request and
discussed with Zalner the possibility of a site inspection.
These circumstances do not suggest that the parties had
reached the point at which they expressed mutual intent to
be bound.
With respect to Algoma, USA offered evidence from which
a jury could conclude that in a telephone conversation
between Tucker and Hughes Algoma agreed to accept USA's
"registration" of CSC as its customer with respect to the
nine ladles, an agreement memorialized in a letter from
Hughes to Tucker. But there is nothing in the record to
suggest that the parties' minds had met on exactly what
such registration entailed. Although USA had
consummated transactions with Algoma in the past, and
had sent Algoma similar registration letters in connection
12
with those transactions, there is nothing in the record from
which a jury could reasonably infer that the parties to the
prior transactions attached the meaning to those letters
that USA urges. These prior letters to Algoma provide an
insufficient explanation of the meaning of registration for a
jury to infer an agreement to negotiate in good faith of the
kind that we found cognizable in Channel Home Centers.
There is insufficient evidence from which a jury could
draw a reasonable inference that Algoma, as a result of
these prior dealings, understood that registration meant
that Algoma agreed to deal exclusively with USA to
consummate the transaction at issue.
Nor has USA offered evidence from which a jury could
conclude that there was an industry custom that would
support the contract claim. When asked on direct
examination at what point on "a continuum from
expressing an initial interest to find a piece of equipment,
sending information, a site visit, then negotiations," a
written agreement was entered into, Hughes testified that it
was "customary . . . that no agreement is made until the
end." App. at 93. He explained that at the outset he would
enter into an agreement under which USA would render
services in exchange for promises from the buyer and seller
that they would not circumvent USA and deal directly with
each other. App. at 94. This testimony is insufficient to
support a finding that it was understood throughout the
industry that the term "registration" involved an agreement
of the kind Hughes outlined as his usual practice. In
addition, Hughes's own testimony of his conversations with
CSC and Algoma do not support a finding that CSC and
Algoma would have understood that "registration" involved
a legally binding promise to deal exclusively with USA,
particularly because Hughes acknowledged that, although
he "believed it was understood," he never even used the
term "exclusive" in those discussions. App. at 209.
Drawing guidance from our decision in Channel Home
Centers, we conclude that this lack of specificity is fatal to
USA's contract claims. Hughes failed to offer evidence that
any essential term of an agreement to sell the caster was
reached; the discussion with Tucker and the letter sent to
him only pertain to the nine ladles, not the caster and
13
associated equipment. The fact that the ladles were
ultimately sold along with the caster and its associated
equipment does not suggest an agreement of the size and
scope contended for by USA. And lacking terms for price,
delivery, or date, or any other indication that the parties
had manifested a mutual intent to bind themselves to a
contract of sale, it cannot be said that this agreement was
one for the sale of the caster, or even of the ladles.
In sum, we find insufficient evidence in this case of an
enforceable agreement either to negotiate in good faith
toward the consummation of a sale transaction or to pay
Hughes a finder's fee if and when the sale was made.
B.
Arguably, USA's unjust enrichment (quantum meruit)
claim in Count 5 is stronger than its contract claim, as a
jury might not have been persuaded by the defendants'
argument that USA provided no benefit to the parties in
connection with the ultimate sale of the caster from Algoma
to CSC. We need not decide that issue because USA's
unjust enrichment claims (as well as its contract claims)
cannot succeed because of its failure of proof with respect
to damages. The District Court stated that damages was
"the most striking problem" with USA's case. App. at 274.
We agree.
To prove damages, USA would have been required to give
the factfinder evidence upon which it could base a
calculation of damages to a "reasonable certainty." ATACS
Corp., 155 F.2d at 668. "Reasonable certainty" as we have
stated, "embraces a rough calculation that is not too
speculative, vague or contingent upon some unknown
factor." Id. at 669 (internal quotation marks omitted).
USA's evidence does not supply a basis for a calculation
of damages that would be anything other than speculative,
vague, or contingent within the contemplation of our
ATACS opinion. In the first place, there is no evidence from
which one might be able to quantify the benefit that USA
claims to have bestowed upon the parties. Hughes testified
that his transactions generally were structured such that
either he negotiated a finder's fee or he would retain as
14
profit the spread between the price the seller was willing to
take from USA and the price that the buyer was willing to
pay USA.
As noted above, there was no evidence that a finder's fee
was negotiated with either of the parties. Nor did USA
present evidence from which a jury could find a custom in
the industry with respect to appropriate finder's fees.
Without evidence that would support a calculation of an
appropriate finder's fee, or an estimate of Hughes's services
on an hourly basis, a factfinder would be forced to engage
in bald conjecture as to the value of USA's services.
Nor could a factfinder determine damages on the basis of
a "spread" between the lower limit of what Algoma would
have accepted for the caster and the upper limit which CSC
would have paid. Because USA, by its own admissions, had
not arrived at even an approximation of the price at which
Algoma was willing to sell and the price at which CSC was
willing to buy, see App. at 268-69, there is no way for a
factfinder to determine what, if any, "spread" would result
from the transactions.
USA contends that it endeavored to introduce such
evidence but was prevented from doing so by the District
Court, an issue we review for abuse of discretion. We find
USA's contention has no merit. The evidence it sought to
introduce was merely Hughes's own testimony regarding
how much he anticipated making from the transaction. See
App. at 197, 203, 204, 206. The District Court rebuffed
these efforts on the ground that the witness's subjective
anticipation was irrelevant. We find no abuse of discretion
in these rulings.
USA further urges that the District Court erred in
refusing to allow Hughes to testify as to what he made in
other, unrelated transactions. The District Court sustained
objections to this line of questioning as well, stating:
There has to be some basis for determining one's
losses. Either they have to be by agreement or there
has to be some standard in the industry. It isn't what
he considered to be the basis . . . . I think it is clear
that they didn't have an agreement. But it just can't be
15
that he picked out some basis and based his opinion
on it.
App. at 198. Insofar as USA's counsel did not lay a
foundation adequate to support the fungibility of
transactions, we find no abuse of the court's discretion in
its unwillingness to admit evidence regarding unrelated
transactions. We note in this regard that Hughes had
earlier testified, on direct, as follows regarding transactions
in his business:
Q. . . . . Is every deal in your business the same ?
A. No, every deal is different, different structure,
depending on the customer and the seller. It can be
structured in a multitude of ways.
App. at 99. Hence, we agree with the District Court that
USA's proffer of evidence regarding other transactions was
insufficiently probative of damages.
Finally, USA urges that it presented evidence of an
industry standard sufficient to create a jury issue on
damages. We disagree. After the District Court had
informed counsel for plaintiff that Hughes would not be
allowed to testify as to his anticipated fee for the
transaction in the absence of any foundation to support it,
and that evidence of an industry standard would be
appropriate, the following colloquy with Hughes occurred:
Q. Are there industry standards in the used steel mill
industry that pertain to norms on transactions on a
percentage basis?
A. Could you be more specific? I am not sure wha t
kind of sale you are referring to.
Q. In connection with the sale of a piece of used steel
mill equipment, are there industry norms or standards
that you are personally familiar with from your
experience in the industry as to appropriate percentage
fee figures as a fee for your services?
A. The standard that I'm familiar with is the bott om
line.
Q. What is that bottom line figure?
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A. 20 percent.
Q. Is that the figure you have utilized in the c ourse of
your experience over the past 20 years?
A. Yes.
App. at 201.
The import of this testimony was clarified on cross-
examination, when, after Hughes reiterated that"we keep a
bottom line of 20 percent," the court began questioning
Hughes as to what he meant:
THE COURT: What does it mean, you keep a bottom
line? Does that mean in every transaction you make at
least 20 percent?
THE WITNESS: We start out.
THE COURT: What does "start out" mean? Do you
make at least 20 percent on every transaction you do?
THE WITNESS: We start out with a bottom line of 20
percent. After negotiation, it's possible to go below that.
But we start with a bottom line of saying, before we
quote a price . . . we say, look, this has got to be 20
percent above the asking price of the seller. Then we
quote the price. Now it might be 40 percent to start
with, but the bottom line is 20 percent because if you
can't do it for 10, you lose money.
App. at 235. At this point, counsel for Algoma then
resumed questioning. After establishing that USA has made
less than ten percent in earlier transactions, counsel asked
the following:
Q. So your 20 percent is an internal starting point?
A. Yes.
Q. It's an internal as opposed to some kind of industry
standard; it's an internal USA starting point?
A. It's an industry standard because I have talked to all
my counterparts and competitors and that's how they
view their deals.
Q. That starting point has nothing to do with where
ultimately brokers end up in terms of the
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compensation they receive, correct? It could be higher,
it could be lower, it's across the board?
A. Yes, uh-huh.
. . .
Q. . . . . Do you agree that there is no industry
standard in determining how much compensation USA
receives?
A. Well, if you're asking me, is there a set percentage
that I make on every deal, the answer is no. There is
no set percentage.
. . .
Q. I am asking, Mr. Hughes, for an industry standard
with respect to the amount of compensation USA
ultimately receives on any given deal. There is no
industry standard is there?
A. No, I would say every deal is different. I have said
that in the past. Every deal is different.
App. at 236-37.
In light of this testimony, we conclude that the District
Court did not err in holding that there was no evidence
upon which a jury could base a finding of damages with the
"reasonable certainty" required by our decision in ATACS.
Contrary to USA's protestation that there is an industry
standard of 20 percent (presumably of the purchase price),
its only witness acknowledged that this figure is simply the
starting point for negotiations--the goal that USA seeks to
accomplish with each deal. The testimony would not
support a finding that the industry at large recognizes that
20 percent of the sale price is an appropriate commission
in the absence of an agreement.
We therefore agree with the District Court that there was
a failure of proof on damages. In light of this conclusion,
there is no need to decide whether, if evidence of damages
were not lacking, USA satisfied its burden of production
with respect to liability for unjust enrichment.
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IV.
For the foregoing reasons, the judgment of the District
Court will be affirmed.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
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