Estrin v. Natural Answers, Inc.

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
MELVYN J. ESTRIN, 
Plaintiff-Appellee,
v.  No. 03-1555
NATURAL ANSWERS, INC.,
Defendant-Appellant.

MELVYN J. ESTRIN, 
Plaintiff-Appellee,
v.  No. 03-1796
NATURAL ANSWERS, INC.,
Defendant-Appellant.

Appeals from the United States District Court
for the District of Maryland, at Baltimore.
Benson Everett Legg, Chief District Judge.
(CA-01-2294-BEL)
Argued: May 4, 2004
Decided: June 29, 2004
Before NIEMEYER, SHEDD, and DUNCAN, Circuit Judges.
Affirmed by unpublished per curiam opinion.
2 ESTRIN v. NATURAL ANSWERS, INC.
COUNSEL
ARGUED: Patrice A. Talisman, HERSCH & TALISMAN, P.A.,
Miami, Florida, for Appellant. Troy Christopher Swanson, COHEN
& SWANSON, Baltimore, Maryland, for Appellee.
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
OPINION
PER CURIAM:
Appellant Natural Answers, Inc. ("NAI") challenges the district
court’s granting Appellee Melvyn Estrin’s ("Estrin") motion for sum-
mary judgment. NAI argues, inter alia, that the district court erred
when it found that no contract was formed between Estrin and NAI,
and that NAI did not establish a claim of promissory estoppel.
Because we conclude that the district court did not err in granting the
motion for summary judgment, we affirm.
I.
NAI, a company founded in 1998, manufactures and sells herbal
and vitamin products. Brian Feinstein is the president, CEO, and con-
trolling shareholder of NAI. At that time, Estrin was CEO of Phar-
Mor, Inc., a national drug store chain, and was also a financier and
venture capitalist. In the fall of 1999, Estrin and Feinstein were intro-
duced by a mutual friend in the hope that Estrin would help Feinstein
expand NAI’s business.
On November 15, 1999, Luis Prats, attorney for Feinstein and NAI,
sent a proposed agreement to Estrin. Prats indicated that the proposal
was "skeletal" and that it was "not written in stone." J.A. 274-75. He
also stated that many details would be filled in "if there is a prelimi-
nary agreement on these matters." J.A. 275. On November 23, 1999,
ESTRIN v. NATURAL ANSWERS, INC. 3
Estrin sent a response to Feinstein with a counter-proposal that "rep-
resent[ed] the lines along which [he’d] like [them] to start thinking,
as [they] develop a relationship going forward." J.A. 276.
Negotiations continued through December of 1999. On January 27,
2000 and February 4, 2000, Estrin sent two payments of $100,000
each to NAI as an advance on the $1.25 million Estrin intended to
invest in NAI in exchange for NAI stock. From late January of 2000
to March 19, 2000, attorneys for Estrin and NAI exchanged drafts of
proposed agreements. On March 20, 2000, NAI terminated negotia-
tions, stating that "the drafting process has and continues to reveal a
substantial and material difference in our clients’ positions." J.A. 722.
On May 16, 2000, Feinstein and NAI filed a breach of contract and
promissory estoppel claim against Estrin in the Circuit Court for Col-
lier County, Florida. Estrin removed the case to the United States Dis-
trict Court for the Middle District of Florida, and the case was then
dismissed for lack of personal jurisdiction. On June 12, 2001, NAI
filed a complaint in the United States District Court for the District
of Maryland, Southern Division, which it voluntarily dismissed on
July 31, 2001. Three days later, Estrin filed the complaint underlying
this appeal, seeking the return of the $200,000 he paid to NAI in
anticipation of the proposed deal. NAI counterclaimed, alleging (1)
breach of contract, (2) promissory estoppel, and (3) breach of the cov-
enant of good faith and fair dealing. Estrin filed a motion for sum-
mary judgment, which the district court granted.
II.
We review a district court’s grant of a motion for summary judg-
ment de novo. Stone v. Liberty Mut. Ins. Co., 105 F.3d 188, 191 (4th
Cir. 1997). To prevail on a motion for summary judgment, a party
must show (1) there is no genuine issue of material fact; and (2) it is
entitled to judgment as a matter of law. Id. at 190. In reviewing the
evidence, we draw all reasonable inferences in favor of NAI, the non-
moving party, Thompson v. Aluminum Co. of Am., 276 F.3d 651, 656
(4th Cir. 2002), and apply the same standards as the district court.
Dist. Mem’l Hosp. v. Thompson, 364 F.3d 513, 517 (4th Cir. 2004).
Because this case arises under the district court’s diversity jurisdic-
tion, those standards are supplied by the substantive law of the state
4 ESTRIN v. NATURAL ANSWERS, INC.
in which the action arose. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78
(1938). In this case, Maryland law applies. We address first NAI’s
counterclaims because they are dispositive of the motion for summary
judgment.
A.
NAI’s initial counterclaim alleges that Estrin and NAI entered into
a contract in December of 1999, and as the breaching party Estrin is
not entitled to a return of the $200,000. In order to address this claim,
we must first determine whether a contract existed.
In Maryland, the hallmarks of a binding contract are "an offer by
one party and an unconditional acceptance of that precise offer by the
other . . . ." Lemlich v. Board of Trs., 385 A.2d 1185, 1189 (Md.
1978). See also, L & L Corp. v. Ammendale Normal Inst., 236 A.2d
734, 736 (Md. 1968) ("[W]here there is a conditional acceptance or
a counteroffer a contract is not made."). It is axiomatic that
[a] party can hardly be bound to reach the intended goal of
negotiations simply by the act of negotiating. Indeed, con-
tinual redrafting of a document indicates the importance of
the terms being negotiated and the parties’ intention not to
be bound until final execution of the written agreement. Par-
ties engage in negotiations not because they intend that the
process itself will constitute the agreement, but because they
desire and intend an eventual writing that will set forth the
final terms satisfactory to both sides in every respect.
Phoenix Mut. Life Ins. Co. v. Shady Grove Plaza Ltd. P’ship., 734
F.Supp. 1181, 1189 (D. Md. 1990) (internal citations omitted).
NAI contends that by the end of December of 1999, a binding
agreement existed between Estrin and NAI which was memorialized
by several letters. Specifically, Prats sent a letter to Estrin on Decem-
ber 3, outlining "certain minimum requirements that must be met"
before an agreement could be reached. J.A. 277. On December 10,
1999, Prats sent another letter to Estrin, summarizing the major terms
of the proposed agreement. A letter from Prats to Estrin on December
ESTRIN v. NATURAL ANSWERS, INC. 5
16, 1999, outlined further negotiations made as a result of the terms
proposed in the December 10 letter. Prats closed the December 16 let-
ter by asking Estrin to call "so that [they could] discuss the letter and
begin working on the final agreement." J.A. 288. On December 28,
1999, Prats sent a follow-up letter to Estrin, asking whether Estrin had
yet engaged an attorney to work on the documentation of the pro-
posed agreement.
In early 2000, Estrin sent the two payments of $100,000 each to
NAI described above. From late January of 1999 to March 19, 2000,
attorneys for Estrin and NAI exchanged drafts of proposed agree-
ments, including draft consulting agreements, draft subscription
agreements, and draft shareholders’ and investor rights agreements.
On March 19, 2000, an attorney for Estrin sent an email to attor-
neys for NAI, including as attachments revised drafts of the consult-
ing, subscription, and shareholder rights agreements. The email
indicated that the latest changes suggested by NAI’s attorneys were
"quite substantial." J.A. 719. In that email, Estrin’s attorney suggested
that a conference call be arranged to "resolve the remaining issues
. . . ." Id. On March 20, 2000, NAI’s attorney sent a response, stating
that "based on the continued gap between the documents [NAI] has
been presented with and asked to sign by [Estrin], and the documents,
as finalized, that [NAI] will sign, . . . all further negotiations have
been terminated." J.A. 722.
These ensuing communications between the parties make it abun-
dantly clear that there was no "offer by one party and an uncondi-
tional acceptance of that precise offer by the other" in December of
1999. Lemlich, 385 A.2d at 1189. Significant terms remained to be
negotiated. Without an agreement as to the essential terms of the deal,
including Estrin’s consulting agreement, Feinstein’s employment
agreement, and the shareholder rights agreement, there could be no
contract. See Klein v. Weiss, 395 A.2d 126, 141 (Md. 1978) ("[T]o
establish a contract the minds of the parties must be in agreement as
to its terms.") (citation omitted). In the absence of a contract, Estrin
could not be in breach.
B.
NAI’s second counterclaim, seeking relief under a theory of prom-
issory estoppel, is similarly unavailing. In order to establish a claim
6 ESTRIN v. NATURAL ANSWERS, INC.
of promissory estoppel under Maryland law, a claimant must show:
"1. a clear and definite promise; 2. where the promisor has a reason-
able expectation that the offer will induce action or forbearance on the
part of the promisee; 3. which does induce actual and reasonable
action or forbearance by the promisee; and 4. causes a detriment
which can only be avoided by the enforcement of the promise." Pavel
Enters., Inc. v. A.S. Johnson Co., Inc., 674 A.2d 521, 532 (Md. 1996).
Our analysis with respect to the existence of a contract applies with
equal force in the context of the applicability of promissory estoppel.
As discussed above, Estrin never made a clear and definite promise
as to the material terms of the proposed deal. It would follow, then,
that Estrin could not have any reasonable expectation that NAI would
rely on the unsettled terms of an unfinalized deal, and that NAI can-
not show that actions based on those unsettled terms made while
drafting and negotiations were ongoing were reasonable.
C.
Lastly, the district court did not err in dismissing Count III of
NAI’s counterclaim alleging a breach of the covenant of good faith
and fair dealing. See Eaglehead Corp. v. Cambridge Capital Group,
Inc., 170 F. Supp. 2d 552, 562 (D. Md. 2001) ("Maryland does not
recognize a separate cause of action for the breach of implied duty of
good faith and fair dealing.").*
D.
Estrin seeks the return of the $200,000 he advanced to NAI in
anticipation of the proposed deal. NAI contends that Estrin was the
party in breach of the contract, and as such is not entitled to a return
of the money. For the reasons discussed above, we agree with the dis-
trict court that no contract existed between the parties. We therefore
affirm the judgment in the amount of $200,000 in favor of Mr. Estrin.
*Several other issues were raised by the parties; we have considered
all of them and find no reversible error.
ESTRIN v. NATURAL ANSWERS, INC. 7
III.
For the foregoing reasons, the judgment of the district court is
AFFIRMED