Massaro Limited Partnership v. Baker & Taylor Inc.

Opinions of the United
2005 Decisions States Court of Appeals
for the Third Circuit
12-15-2005
Massaro Ltd v. Baker & Taylor Inc
Precedential or Non-Precedential: Non-Precedential
Docket No. 04-1523
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 04-1462
No. 04-1523
MASSARO LIMITED PARTNERSHIP (PARK WEST TWO),
a Pennsylvania Limited Partnership
v.
BAKER & TAYLOR INC., a corporation,
Appellant, No. 04-1462
MASSARO LIMITED PARTNERSHIP (PARK WEST TWO),
a Pennsylvania Limited Partnership,
Appellant, No. 04-1523
v.
BAKER & TAYLOR INC., a corporation
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
District Court No. 00-cv-01234
District Judge: The Honorable Gary L. Lancaster
Argued July 14, 2005
Before: ALITO, VAN ANTWERPEN, and ALDISERT, Circuit Judges
(Opinion Filed: December 15, 2005 )
ANTHONY CILLO (Argued)
Cohen & Grigsby, P.C.
11 Stanwix Street, 15th Floor
Pittsburgh, Pennsylvania 15222
HALSEY G. KNAPP, JR.
Foltz Martin, LLC
Suite 750
Five Piedmont Center
Atlanta, Georgia 30305
THOMAS L. PATTEN
RICHARD P. BRESS
Latham & Watkins
555 11th Street, N.W.
Suite 1000
Washington, DC 20004
Counsel for Baker & Taylor Inc.
STANLEY M. STEIN (Argued)
BETH S. MILLS
Feldstein Grinberg Stein & McKee
428 Boulevard of the Allies
Pittsburgh, Pennsylvania 15219
Counsel for Massaro Limited Partnership (Park
West Two)
OPINION OF THE COURT
2
PER CURIAM:
Baker & Taylor Inc. (“B&T”) appeals from a final order of the District Court
denying its motion for judgment as a matter of law following a jury verdict against it on a
claim for promissory estoppel. Massaro Limited Partnership (Park West Two)
(“Massaro”) cross-appeals an earlier order, now final, which awarded summary judgment
to B&T on Massaro’s contract claim for breach of the implied covenant of good faith and
fair dealing. Because we write solely for the parties, we need not recite the facts any
further. For the reasons set forth below, we reverse the judgment of the District Court on
the promissory estoppel claim and affirm in all other respects.
I.
We review an award of summary judgment de novo, applying the same test that the
District Court should have applied. In re Ikon Office Solutions, Inc., 277 F.3d 658, 665
(3d Cir. 2002). Under Federal Rule of Civil Procedure 56(c), summary judgment should
be rendered “if the pleadings, depositions, answers to interrogatories, and admissions on
file, together with the affidavits, if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to a judgment as a matter of law.” In
applying this test, the Court must draw all reasonable inferences from the evidence in
favor of the nonmoving party and may not weigh the evidence or assess credibility. See
Abraham v. Raso, 183 F.3d 279, 287 (3d Cir. 1999); Petruzzi’s IGA Supermarkets, Inc. v.
Darling-Del. Co., 998 F.2d 1224, 1230 (3d Cir. 1993).
3
The denial of a motion for judgment as a matter of law also receives plenary
review. See Le v. Univ. of Pa., 321 F.3d 403, 406 (3d Cir. 2003). When the jury has
resolved an issue of fact, the Court’s review is “‘limited to examining whether there is
sufficient evidence to support the verdict, drawing all reasonable inferences in favor of
the verdict winner.’” Id. (quoting Kelly v. Matlack, Inc., 903 F.2d 978, 981 (3d Cir.
1990)). The verdict is supported by sufficient evidence if the record reflects at least the
“minimum quantum” of evidence necessary for a reasonable jury to find for the prevailing
party based on the applicable evidentiary standard. See Starceski v. Westinghouse Elec.
Corp., 54 F.3d 1089, 1095 (3d Cir. 1995).
II.
Massaro argues that the District Court should have admitted evidence of B&T’s
bad faith, but any error has been mooted by the jury’s verdict on Massaro’s contract
claim. When asked whether “the ‘Letter of Intent’ . . . contractually obligated Baker &
Taylor to rent the property,” the jury responded in the negative. App. at 194. Yet
Massaro submits, and we agree, that the Letter of Intent (“LOI”) was a contract imposing
binding obligations on each party. See, e.g., Massaro’s Br. at 14-17; ATACS Corp. v.
Trans World Comms., 155 F.3d 659, 667 (3d Cir. 1998). Viewing these facts in a manner
that gives B&T the benefit of every reasonable inference, we believe the jury found that
B&T’s performance under the LOI never came due because the board approval condition
was never satisfied.
4
This finding, which is supported by the plain text of the LOI, forecloses Massaro’s
good faith claim because “[i]mplied duties cannot trump the express provisions in the
contract.” John B. Conomos, Inc. v. Sun Co. (R&M), 831 A.2d 696, 706 (Pa. Super. Ct.
2003). No duty to negotiate a final lease in good faith can be inferred from the LOI if the
board approval condition expressly relieved B&T of any duty to lease the premises. Since
this is precisely what the jury found when asked whether the LOI “contractually obligated
Baker & Taylor to rent the property,” Massaro’s good faith claim is foreclosed and
B&T’s award of summary judgment must be affirmed.1
1
Having affirmed on the alternative ground afforded by the jury’s verdict, we need not
decide whether Pennsylvania law would read a covenant of good faith and fair dealing
into this particular contract. Compare Parkway Garage, Inc. v. City of Philadelphia, 5
F.3d 685, 701 (3d Cir. 1993) (“[U]nder Pennsylvania law, every contract does not imply a
duty of good faith.”), with Academy Indus., Inc. v. PNC Bank, N.A., Nos. 00-2383 & 00-
0634, 2002 WL 1472342, at *7 (Pa. Ct. Com. Pl. May 20, 2002) (unreported decision)
(declaring that “a covenant of good faith is implied in every contract” and criticizing
contrary decisions on the ground that they confused good faith duties in tort and contract),
and Fremont v. E.I. DuPont DeNemours & Co., 988 F. Supp. 870, 874 (E.D. Pa. 1997)
(questioning the soundness of the precedent underlying Parkway Garage).
We also need not decide whether Massaro’s endorsement of the magistrate’s report
and recommendation effected a waiver. B&T argues that it did under an old line of
Supreme Court authority, but those cases involved consent decrees. See United States v.
Babbitt, 104 U.S. 767, 768 (1881); Pac. R.R. v. Ketchum, 101 U.S. 289, 295 (1879).
Those cases did not address factors relevant to the operation of the magistrate system,
such as the text of the Federal Magistrates Act, 28 U.S.C. § 636. Cf. Henderson v.
Carlson, 812 F.2d 874, 877-78 (3d Cir. 1987) (concluding, based in part on the text of
§ 636(b)(1)(C), that failure to object to a magistrate’s recommendation does not effect a
waiver). Whether a party’s endorsement of a magistrate’s recommendation results in a
waiver thus remains an open question. Because a waiver would not affect our
jurisdiction, see Ketchum, 101 U.S. at 295; Tabron v. Grace, 6 F.3d 147, 153 n.2 (3d Cir.
1993), we reserve this interesting issue for another day.
5
III.
We turn to B&T’s motion for judgment as a matter of law. The jury found by clear
and convincing evidence that “Mr. Benjamin promised that Baker & Taylor’s Board’s
approval of the rental agreement was a ‘mere formality’ and thus, Baker & Taylor was
committed to renting the property.” App. at 196. The parties dispute whether the jury
found an express promise and, if not, whether an implied promise could support an
estoppel. Although we tend to believe the evidence, viewed in the light most favorable to
Massaro, could easily support a finding that an express promise had been made, we need
not resolve this issue definitively. Under the facts of this case, even an express promise
would be unenforceable as a matter of law.
Pennsylvania’s doctrine of promissory estoppel is set forth in the Second
Restatement of Contracts, which provides:
A promise which the promisor should reasonably expect to
induce action or forbearance on the part of the promisee or a
third person and which does induce such action or
forbearance is binding if injustice can be avoided only by
enforcement of the promise.
Restatement (Second) of Contracts § 90(1) (1981); see also Pittsburgh Baseball, Inc. v.
Stadium Auth., 630 A.2d 505, 509 n.5 (Pa. Commw. Ct. 1993) (“Pennsylvania has
adopted the doctrine of promissory estoppel as it appears in the Restatement . . . .”). As
the last clause of this formulation makes clear, not every promise on which a party
reasonably and foreseeably relies is enforceable. The enforceability of the promise
6
depends on the following factors:
the reasonableness of the promisee’s reliance, on its definite
and substantial character in relation to the remedy sought, on
the formality with which the promise is made, on the extent to
which the evidentiary, cautionary, deterrent and channeling
functions of form are met by the commercial setting or
otherwise, and on the extent to which such other policies as
the enforcement of bargains and the prevention of unjust
enrichment are relevant.
Restatement § 90 cmt. b.
The Pennsylvania Supreme Court applied these factors in Thatcher’s Drug Store of
West Goshen, Inc. v. Consolidated Supermarkets, Inc., 636 A.2d 156 (Pa. 1994). In that
case, the defendant promised the plaintiff that it had no intention of opening a pharmacy
in its store if the plaintiff opened one in a nearby retail space. The plaintiff opened its
pharmacy and then sought to enforce the defendant’s promise when the defendant opened
one in its store. Concluding that the trial court’s findings were unsupportable, the
Pennsylvania Supreme Court denied enforcement of the promise on the grounds that the
plaintiff’s “reliance was unreasonable; nothing was done to formalize the promise; and no
evidentiary, cautionary or deterrent functions were met under the circumstances.” Id. at
160.
These same factors weigh heavily against enforcement here. Like the words at
issue in Thatcher’s Drug Store, Benjamin’s promise was “indefinite on its face.” 636
A.2d at 160 n.7. The phrase “mere formality” does not actually promise board approval
so much as characterize the process by which board approval will be sought and predict a
7
likely outcome. Indeed, David Massaro admitted that Benjamin’s statement was a
“prediction of future events” and “inherently unreliable.” App. at 436-37. As such, it
could hardly assure Massaro that B&T was “committed” to leasing the premises. Cf.
Josephs v. Pizza Hut of Am., Inc., 733 F. Supp. 222, 226-27 (W.D. Pa. 1989) (concluding
that an estoppel could not be supported by an assurance that execution of a lease was a
“mere formality”).
Massaro understood the importance of having B&T’s commitments in writing
(which was why it pressed B&T to sign the LOI), yet it did nothing to have Benjamin’s
promise formalized or memorialized. It relied on an oral promise made on the spot
during a telephone call from a “disturbed” David Massaro. App. at 426. As in Thatcher’s
Drug Store, “the record fails to reveal that the parties even so much as shook hands” to
cement their understanding of Benjamin’s promise. 636 A.2d at 161. The omission of
any formality is all the more striking in light of the tension between the promise and the
text of the LOI, which stated without any qualification that the lease was subject to board
approval. Just as the supermarket’s lease gave it “a clear right” to open a pharmacy, id. at
160, the LOI gave B&T a clear right to reject the lease.
Massaro argues that its reliance was reasonable in light of its ongoing relationship
with B&T, but the parties’ relationship is largely beside the point. Though equitable in
origin, the doctrine of promissory estoppel serves as a consideration substitute. See Fried
v. Fisher, 196 A. 39, 41-42 (Pa. 1938); Robert Mallery Lumber Corp. v. B. & F. Assocs.,
8
Inc., 440 A.2d 579, 583 (Pa. Super. Ct. 1982). It operates to protect a promisee whose
reliance cannot be secured by contract because the promise on which he relied was
unsupported by consideration. See Carlson v. Arnot-Ogden Memorial Hosp., 918 F.2d
411, 416 (3d Cir. 1990); Blue Mountain Mushroom Co. v. Monterey Mushroom, Inc., 246
F. Supp. 2d 394, 408 (E.D. Pa. 2002); Fried, 196 A. at 41. As one Court explained, it is
“an equitable remedy to be implemented only when there is no contract; it is not designed
to protect parties who do not adequately memorialize their contracts in writing.” Iversen
Baking Co. v. Weston Foods, Ltd., 874 F. Supp. 96, 102 (E.D. Pa. 1995).
If anything, Massaro’s relationship with B&T militates against enforcement. At
least the plaintiff in Thatcher’s Drug Store could claim that it never incorporated the
promise into the parties’ written agreement because there was no agreement. Massaro, by
contrast, was in the course of negotiating the LOI at the time the promise was made. Had
it wished to rely on Benjamin’s assurance that board approval was a “mere formality” and
that B&T was committed to leasing the premises, it could have bargained to have this
language included in the LOI. See Kreutzer v. Monterey County Herald Co., 747 A.2d
358, 362 (Pa. 2000) (observing that “persons of ordinary prudence will modify a writing
with another writing in any matter of importance”). Since Massaro’s loss could have
been avoided by including Benjamin’s promise in the parties’ agreement, equitable
enforcement of the promise was not necessary to avoid injustice. Cf. Restatement
§ 90(1).
9
Finally, the indefinite character of Massaro’s reliance counsels against
enforcement. There was no question in Thatcher’s Drug Store that all of the plaintiff’s
damages were incurred in reliance on the defendant’s promise. The undisputed record
here shows just the opposite. Massaro faxed a letter to Equitable Resources Marketing
Group (“Equitable”) on March 16, 2000, offering to terminate its lease for $200,000.
Massaro does not dispute that this offer satisfied the Statute of Frauds for any
modification of the parties’ interests in the property. See, e.g., 68 Pa. Cons. Stat.
§ 250.202; Target Sportswear, Inc. v. Clearfield Found., 474 A.2d 1142, 1149 (Pa. Super.
Ct. 1984). Had Equitable accepted the offer by return fax that day, Massaro would have
had a binding obligation to terminate the lease. See Taylor v. Stanley Co. of Am., 158 A.
157, 158 (Pa. 1932). The record thus leaves no doubt that Massaro was prepared to
release Equitable on March 16, 2000 – five days before the LOI was signed. Since the
LOI served as the predicate for Benjamin’s promise that board approval was a “mere
formality” and that B&T was committed to a lease, any action prior to its signing could
not have been taken in reliance on Benjamin’s promise.
Even if Massaro relied on Benjamin’s promise in releasing US Airways, Inc., the
remaining Restatement factors do not justify the recovery of this piecemeal reliance. For
the reasons given above, those factors weigh against enforcement at least as heavily here
as they did in Thatcher’s Drug Store. No reasonable factfinder could conclude that
enforcement of Benjamin’s promise is necessary to avoid an injustice; indeed, we believe
10
enforcement is likely to perpetrate an injustice. B&T was entitled to judgment as a matter
of law, and the judgment of the District Court is accordingly reversed.
IV.
In sum, we conclude that B&T was entitled to summary judgment on Massaro’s
claim for breach of an implied covenant of good faith and fair dealing, and we affirm that
portion of the District Court’s judgment. We also conclude that B&T was entitled to
judgment as a matter of law on Massaro’s claim for promissory estoppel and that the
District Court erred in denying its motion. Because we reverse that portion of the
judgment, we need not resolve the parties’ dispute over the proper calculation of
Massaro’s damages. On remand, an appropriate judgment shall be entered for B&T.
11