Kutite, LLC v. Excell Petroleum, LLC

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 19a0340n.06
No. 17-6205
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
FILED
KUTITE, LLC; MOHAMMED Z. KUTITE, ) Jul 05, 2019
) DEBORAH S. HUNT, Clerk
Plaintiffs-Appellants, )
)
v. )
ON APPEAL FROM THE
)
UNITED STATES DISTRICT
EXCELL PETROLEUM, LLC; MAJORS )
COURT FOR THE WESTERN
MANAGEMENT, LLC; SHELBY DRIVE 3796 )
DISTRICT OF TENNESSEE
CENTER, LLC, )
)
Defendants-Appellees. )
Before: WHITE, DONALD, and LARSEN, Circuit Judges.
LARSEN, Circuit Judge. Mohammed Kutite and Kutite, LLC, of which Mr. Kutite is the
sole member, sought to lease a gas station owned, managed, and supplied by the defendants. The
process hit a snag, however, when the parties disputed whether Kutite had to sign an agreement to
use an ATM already present in the store. The relationship never recovered, leading Kutite to file
this suit. Ultimately, the district court found for the defendants, and for the reasons stated, we
AFFIRM.
I.
In 2012, Kutite sought to take over an Exxon gas station and store in Memphis, Tennessee,
by way of assignment from the then-current lessees, Azel Investment Group, Altareb Dahan
Mahmoodnaji, and Mutahar Muhammed Sharhan (the Assignors). The defendants are the fuel
supplier for that station, Excell Petroleum, LLC; the manager of the premises, Majors
No. 17-6205, Kutite, LLC v. Excell Petroleum, LLC
Management, LLC; and the landlord of the premises, Shelby Drive 3796 Center, LLC.
After speaking with the Assignors about taking over their lease of the store, Kutite approached
Dustin Hewatt, the son of the principal of Majors Management, about getting approval to operate
the store. Mr. and Mrs. Kutite passed a credit and criminal background check.
On September 6, 2012, Kutite signed a Lease Agreement and Bill of Sale with the
Assignors that was conditioned on the final approval by the defendants. These documents obliged
Kutite to pay the Assignors $50,000 for “good will”—Kutite had already paid half—as well as the
cost of the store’s inventory and fuel. The remaining $25,000 for goodwill was due on or before
October 1, 2012, the closing date listed in the agreement.
On September 27, 2012, Judy Fawbush, a Majors Management employee, sent Kutite five
documents: the Assignment of Agreements, the Amendment to Memorandum of Agreement, the
Lease, the First Amendment to Lease, and the Contract Supply Agreement. Kutite was told he had
to sign, notarize, and return the Assignment of Agreements, which assigned the Lease to Kutite,
and the Amendment to Memorandum of Agreement, which assigned the Contract Supply
agreement to Kutite (collectively, the Assignment Documents). An email sent by Fawbush to
Kutite asked Kutite to return the signed, witnessed, and notarized documents and stated “[o]nce
Scott Moon signs, we will send you and the assignor a copy of the Assignment of Agreements.”
Moon is the Executive Vice President and Manager of Majors Management, and the Manager of
Excell and 3796 Center. Kutite and the Assignors signed and notarized the documents and emailed
them to Majors Management on September 28, 2012. The Assignment Documents contained
blank spaces for Moon to sign, but there are no copies of the Assignment Documents in the record
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that include his signatures. The Assignment Documents state that they are “entered into this 21
day of September, 2012, and made effective as of October 1, 2012.”1
On October 2, 2012, Kutite began operating the store. That same day, however, Katie
Clink from Majors Management emailed Kutite, explaining that the assignment of the premises
was not complete until Kutite signed the “Assignment and Acknowledgement Agreement
Regarding Exclusive ATM Agreement.” According to Clink, “[o]nce we have that, I’ll get the
landlord to sign the assignment and get a copy to you.” The ATM Agreement required Kutite to
use the ATM that was already present in the store and accomplished this goal by assigning the
existing ATM agreement between the Assignors and the ATM owner, Tennessee Management, to
him. Kutite balked and would not sign the ATM Agreement. Majors Management Field
Representative Karl House had told Kutite early in the process that he could install an ATM of his
choosing in the store. But House also testified that, at that time, he thought Kutite could choose
his own ATM because Kutite had told House that he had a lease with the defendants, so House
“assumed that the previous lease was voided and not in play anymore . . . and not amended.”
Nonetheless, because Kutite did not sign the ATM Agreement, the defendants never signed and
returned the Assignment Documents. Roughly two weeks after learning of the issue with the ATM
Agreement, Kutite entered into an agreement with a different ATM company to provide an ATM
for the store. On November 8, Majors Management again told Kutite that it was holding the final
Assignment Documents until it received the signed ATM Agreement.
1
We note that the dates are handwritten. It is unclear who added the dates and when. The only
information we have is from an email exchange between Fawbush and another employee, Katie
Clink. Clink wrote, “We may need to get something else signed before we give these back to the
tenant, so don’t send them out until I’ve given final approval. Do you know when they’re supposed
to take over? Joe emailed me today saying that he had a note it was today, but I hadn’t heard
anything.” Fawbush responded, “I don’t know when—I left the effective date blank and they
(assignor and assignee) did, too.”
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Still, Kutite operated the store, paying rent for four months, which the defendants accepted,
and purchasing fuel from Excell. Kutite stopped paying rent in February 2013 and last purchased
fuel in June 2013. There is some dispute as to exactly what happened, whether Kutite went on
vacation, or whether he abandoned the store, but the last day Kutite was in the store was September
24, 2013.
On February 8, 2013, Kutite filed a complaint for injunctive relief and money damages in
Tennessee state court, alleging several claims, including breach of contract, promissory estoppel,
tortious interference with contract, and usury. Kutite sought compensatory damages, lost profits,
and punitive damages. The defendants filed a counterclaim for damages allegedly caused by
Kutite. On February 19, 2013, the defendants removed the case to the federal district court.
After a series of motions and discovery requests, the parties both filed motions for summary
judgment on July 22, 2015. Over a year later, on August 24, 2016, the district court entered an
order denying in part and granting in part the cross-motions for summary judgment. On the breach
of contract claim, the district court found that the parties never reached a meeting of the minds and
never executed a formal written contract because of the disagreement over the ATM. But the court
found that genuine issues of material fact remained on the promissory estoppel claim.2 The court
further found that genuine issues of material fact remained on compensatory damages and lost
profits, but that punitive damages were not available for Kutite.
The court set a trial date. But before that trial could happen, the defendants filed a motion
for clarification and reconsideration of the court’s order granting in part and denying in part the
motions for summary judgment. The defendants focused their attention on promissory estoppel,
2
The court granted summary judgment to the defendants on Kutite’s tortious interference with
contract and usury claims. These claims are not at issue on appeal.
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asking the court to reconsider its decision on that claim. The district court canceled the trial and
instead held a hearing on the defendants’ motion.3 On the second day of the hearing, the court
orally granted the defendants’ motion for reconsideration and summary judgment.
The district court followed up with a written opinion on September 11, 2017. The court
again held that no valid contract existed, but this time found that estoppel should not apply to
create an agreement where there was not one. After discussing damages, the court concluded that
“[d]efendants are entitled to $85,184.12 in rent and [maintenance] charges. Defendants[’] request
for $44,462.51 in security guard fees is reduced to $13,915.71. Plaintiffs are awarded an $11,000
setoff for illegal overdraft fees. Accordingly, Plaintiffs are ordered to pay Defendants
[$]88,099.83 in damages.” Kutite timely appealed.
II.
Enforceable Contract. Kutite contends that the district court erred by concluding that no
enforceable contract existed between the parties. Establishing the existence of a valid contract is
the first step to a breach of contract claim under Tennessee law.4 ARC LifeMed, Inc. v. AMC-
Tenn., Inc., 183 S.W.3d 1, 26 (Tenn. Ct. App. 2005). “Every contract results from an offer and
the acceptance thereof.” Sutton v. First Nat. Bank of Crossville, 620 S.W.2d 526, 532 (Tenn. Ct.
App. 1981). The offer and acceptance show the necessary meeting of the minds between the
parties to form a contract. Id.; see also Staubach Retail Servs.-Se., LLC v. H.G. Hill Realty Co.,
3
We confess to being confused by the nature of this hearing. It was, in essence, a trial, as it
spanned two days and several witnesses testified. Although counsel at argument before this court
admitted to likewise being confused by the event, neither party objected to the process or to the
court’s decision to resolve the case on summary judgment grounds after such a hearing.
4
In its report and recommendation, the magistrate applied Georgia law when discussing whether
an enforceable contract existed. Although the district court adopted the report and
recommendation, the district court applied Tennessee law throughout the remaining proceedings,
and the parties discuss only Tennessee law on appeal.
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No. 17-6205, Kutite, LLC v. Excell Petroleum, LLC
160 S.W.3d 521, 524 (Tenn. 2005) (“A contract must result from a meeting of the minds of the
parties in mutual assent to the terms . . . .”) (quotation marks omitted). “In determining mutuality
of assent, courts must apply an objective standard based upon the parties’ manifestations.”
Staubach Retail, 160 S.W.3d at 524. Contracts “can be expressed or implied, written or oral.”
T.R. Mills Contractors, Inc. v. WRH Enters., LLC, 93 S.W.3d 861, 865 (Tenn. Ct. App. 2002). “A
written contract does not have to be signed to be binding on the parties.” Id. “Similarly, when an
agreement is reduced to writing but is signed by only one of the parties, it is binding on the non-
signing party if that party has manifested consent to its terms.” Id. at 865–66.
Kutite first argues that the parties entered into a formal contract on September 28, 2012,
when he executed the documents sent to him by the defendants and returned them to Majors
Management. Kutite, in other words, conceives of the defendants’ sending of the documents as
an offer, and his signing and return as acceptance. And because, in Kutite’s view, a contract was
formed on September 28, the defendants could not later add additional terms, like the ATM
agreement. We disagree that the documents sent to Kutite constituted an offer that he could accept
by signing and returning5 and that a contract was formed on September 28. The ultimate
acceptance of the deal hinged not on Kutite signing and returning the documents, but on the
defendants’ final indication of assent. Several reasons support this conclusion.
First, as background, there can be no question that Kutite was on notice that the assignment
of the lease on the store was contingent upon the defendants’ approval. The relevant documents
conditioned the completion of the assignment from the Assignors to Kutite on the final consent of
5
See 21 Tenn. Prac. Contract Law and Practice § 4:14 (“An offer creates the power of contractual
acceptance in the offeree. Similarly, the Restatement (Second) of Contracts characterizes an
‘offer’ as one party’s manifestation of willingness to enter into a bargain that justifies another party
in understanding that its assent to that bargain is invited and will conclude it.”).
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the defendants. For example, the Lease Agreement between 3796 Center and the Assignors, which
Kutite sought to take over, stated that the Assignors “may not assign or sublet this Lease or any
interest hereunder, or sublet the Premises or any part thereof, or permit the use of the Premises by
any party other than Tenant, without the prior written consent of Landlord, which shall be at
Landlord’s sole and absolute discretion.” The Fuel Supply Agreement between Excell and the
Assignors states that the Assignors “shall not assign this Agreement in whole or in part without
the prior written consent of [Excell]. Such consent may be withheld if [Excell] determines that
the proposed assignment is not in its best interest.” The defendants’ consent to the Assignment of
Agreements was premised on the Assignors and Kutite agreeing “to execute any necessary
documents in order to secure Landlord’s interest in the Lease or other Agreements.” And even the
Agreement and Bill of Sale between the Assignors and Kutite conditioned the agreement “upon
final approval of the sub-lease from Sellers to Buyer by [defendants].” So Kutite knew that he
needed the defendants’ approval for the lease assignment to be final. Whether he got that approval
depends on whether a contract was formed with the defendants when, on September 28, he
executed and returned the documents they had sent him the day before.
The documents Fawbush emailed to Kutite on September 27 contemplated that they would
be signed and notarized by all parties.6 As sent to Kutite, the lines for Scott Moon to sign, as
Manager of 3796 Center and Excell, and the corresponding notary spaces were left blank,
indicating that Kutite was to execute the documents first with the defendants to follow. Fawbush’s
email to Kutite also expressed this understanding. Fawbush asked Kutite to sign the documents,
6
The Assignment Documents conclude: “IN WITNESS WHEREOF, the Assignor, Assignee,
Landlord, and Supplier have caused this instrument to be executed under seal on the day and year
first above written,” followed by blank lines for the signatures of all the relevant parties and for
the notary.
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No. 17-6205, Kutite, LLC v. Excell Petroleum, LLC
have them notarized, and send them back to Majors Management. She then wrote, “Once Scott
Moon signs, we will send you and the assignor a copy of the Assignment of Agreements.”
The relevant documents and Fawbush’s email, therefore, make clear that final acceptance
needed to come from the defendants after Kutite signed and returned the documents. The
testimony of Benjamin Smith, Chief Administrative Office of Majors Management, confirms that
it was the defendants’ regular practice to indicate their acceptance last. He testified that it is often
the case that after Majors Management sends the lease documents to a future tenant, the tenant
makes edits to the document. He then explained:
[I]f we decide to do business, then, you know, we would circulate
documents, as we were discussing, and eventually those would become final and
they would be sent first to the perspective tenant for their signature and then we
always . . . want to control the process and we don’t want someone coming back to
us and saying, hey, you know, we thought we had an executed agreement
when . . . there wasn’t one, so we are always the last one to sign an agreement.
That’s . . . by design so that we always can be certain when an agreement is
executed by us that it is fully executed.
When asked whether Majors Management has “a practice of verbally agreeing [to] leases . . .
without entering into a written fully executed lease,” Smith responded, “No. For a number of
reasons that’s problematic.”
Smith’s testimony comports with the conclusion we derive from the relevant documents
and from Fawbush’s email—Kutite’s executing and returning the documents was not the last step
to finalizing the parties’ agreement. Instead, no agreement would be reached unless and until the
defendants indicated their final approval.
Kutite counters that even if no contract was formed when he sent the documents to Majors
Management on September 28, a contract was nonetheless formed thereafter. Kutite claims that
documents produced in discovery prove that Moon did sign the documents Kutite had returned
and that, upon Moon’s signature, the defendants had accepted the agreement. Again, we disagree.
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No. 17-6205, Kutite, LLC v. Excell Petroleum, LLC
Kutite points to an internal email discussion between Majors Management employees,
Fawbush and Clink, on October 2, 2012. Clink wrote, “Did the new tenant sign anything yet? I
think you emailed the agreement to him. . . .” Fawbush responded, “Yes, I’ve got the signed
documents and Scott has signed them. Just need to get them notarized on our end. What is the
effective date?” Clink responded, “We may need to get something else signed before we give
these back to the tenant, so don’t send them out until I’ve given final approval.” That something
else was the ATM Agreement. While this exchange is evidence that Moon did sign the documents,
signing alone is not enough. It is well-settled that a contract “is not binding until its acceptance is
communicated to the other party.” Cole-McIntyre-Norfleet Co. v. Holloway, 214 S.W. 817, 818
(Tenn. 1919); see also 2 Williston on Contracts § 6:5 (4th ed.) (“It is often said that the offeror
must receive notice of acceptance as a prerequisite for completion of a contract.”).
Here, all sides agree that the signed documents were never sent to Kutite. Not until
discovery in this lawsuit did Kutite have any indication that Moon might have signed the
documents. Kutite’s argument that Moon’s signature alone could create an acceptance of the offer
fails. Communication of an offer’s acceptance is a critical step in contract formation. Cole-
McIntyre-Norfleet Co., 214 S.W. at 818.
The defendants did not need to indicate their acceptance in writing, however. In some
circumstances, verbal assent, or even contract performance can indicate a party’s intent to be
bound. See id. (“The acceptance, however, of such an offer, may be communicated by the other
party either by a formal acceptance, or acts amounting to acceptance.”); see also Moody Realty
Co., Inc. v. Huestis, 237 S.W.3d 666, 674 (Tenn. Ct. App. 2007) (“The parties’ actions or inactions,
as well as spoken words, can establish mutual assent.”). But here there is no indication that the
defendants communicated assent to the agreement orally. Instead, after determining internally that
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the agreement was not satisfactory without the ATM agreement, on October 2, Clink informed
Kutite: “There is one additional document we will need before we can complete the assignment
[the ATM Agreement]. I tried sending it earlier, but I think it bounced back. . . . Once we have
that, I’ll get the landlord to sign the assignment and get a copy to you.” Kutite acknowledges that
he received the ATM Agreement from Clink on October 2, 2012. Internally, the defendants
continued to recognize that the agreement had not been finalized. In an October 3, 2012 internal
email, Clink wrote, “I sent the assignor an email yesterday with that atm doc to sign. If I don’t
hear from him today, I’ll call him tomorrow.” Clink wrote another email to Fawbush on October
9, 2012, stating, “I’ve called and left 2 messages and emailed him the document he needs to sign.
I guess we just don’t sign this assignment until we get that ATM assignment agreement.” And
then, on November 8, the defendants again informed Kutite that there was no finalized agreement.
Fawbush told Kutite that the defendants were still holding the documents because, as she said,
“I was told to hold the documents until we get the signed ATM Agreement.”
Kutite testified that he knew that without him signing the ATM Agreement, there was no
contract. The following colloquy between the court and Mr. Kutite occurred:
Q. The first you know about the ATM Agreement for the ATM that was in the business
was October 2nd?
A. Correct.
Q. I think the communications to you, either on that date or shortly thereafter, indicated
that essentially you had no agreement?
A. Yes.
Q. Unless you entered, you know, unless you took on that ATM there?
A. Correct.
...
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No. 17-6205, Kutite, LLC v. Excell Petroleum, LLC
Q. Email on October 2nd as well as November the 8th?
A. Correct.
Q. . . . I guess my concern is before entering into the new ATM agreement, why didn’t you
get to the bottom of it? . . . Why didn’t you stop what you were doing until the agreement
as far as the ATM was . . . decided. I don’t understand why you kept on.
A. Because nobody mentioned. . . . I have everything going smooth and I have all the
documentation he signs and all the correspondence back and forth, it was go further until I
start working in the store.
Q. I understand you’re in the store. But you received from Ms. [Clink] the e-mail on
October the 2nd?
A. October the 2nd, yes.
Q. You never received the agreements back from them, back from Majors?
A. Because I didn’t know that . . . they leave agreements or they hold until I have to sign
them, ATM machine, nobody told me about it. The ATM machine agreement it wasn’t
part of the deal when I discuss with Mr. Dustin from the beginning.
Even when they email me all the five documentation, the first email, it wasn’t
including the ATM machine. . . .
Q. . . . [B]ut as a businessman you know that you really don’t have an agreement until you
get the signed documents back from the other side?
A. . . . [T]hat’s true. And actually, I was waiting, waiting until they send me that.
Q. I understand. But she let you know on October 2nd, even though it wasn’t brought up
before, that there was another agreement?
A. I was already in the store running the business.
Q. I understand that.
A. Yeah, yeah, but still all this agreement and my point is the ATM Machine, it wasn’t
actually part of the deal from the beginning.
...
Q. But you did know as of October the 2nd that was part of the deal?
...
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A. That’s the first time we know that from them, yeah.
Q. And so it came down to you, didn’t it, to either accept it or not?
A. When it came down to me, I was asking them why I have to –
Q. I understand you asked them that, but the bottom line is, if that’s a part of the agreement
and you don’t agree to it, then there is no agreement at all.
And I’m trying to understand why you stayed in business and continued to try to
operate it when you didn’t have the agreements?
A. But I don’t have the agreement because I was waiting on them. I signed, I sent
everything to them and they didn’t send it back to me.
Q. But they told you on a couple of occasions that they were not going to send the
agreements, didn’t they?
A. They didn’t send the agreement until I signed the ATM Machine.
...
Q. Okay. Ms. [Clink] said on October 2nd and also November the 8th that if you don’t,
basically if you don’t sign the ATM agreement, we don’t have an agreement at all, that’s
what she was saying. Am I . . . correct in that?
A. Yes, yes, Your Honor, yes.
In sum, the defendants did not communicate acceptance of the agreement, either orally or
by returning the signed documents to Kutite. Instead, the defendants’ consistent communication
with Kutite in the weeks after he signed and sent the documents to the defendants informed him
that there would be no final contract until Kutite signed the ATM Agreement, which he never did.
Nonetheless, Kutite relies on Moody Realty Co., Inc. v. Huestis, 237 S.W.3d 666 (Tenn.
Ct. App. 2007), to argue that a valid contract was formed. He claims that under Huestis, a valid
contract was formed when he signed and returned the documents which Majors Management had
drafted and sent to him. Alternatively, he argues that the defendants indicated their acceptance of
the agreement by performing under the contract.
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In Huestis, the Huestises sought the help of Moody Realty in buying a dairy farm. Huestis,
237 S.W.3d at 669. Moody showed the Huestises a few farms and that same day presented them
with a standard Buyer’s Representation Agreement. Mr. Huestis signed the agreement. Moody’s
agents eventually signed the contract, but they did not sign it in the presence of the Huestises. The
question was whether the parties had reached an agreement that day that precluded Mr. Huestis
from purchasing a farm without the assistance of Moody. The Tennessee Court of Appeals found
that “the record supports a finding of mutual assent to be bound even assuming the agents did not
sign the agreement in front of Mr. Huestis.” Id. at 675. According to the court, “[w]hen only one
party signs a written contract that contemplates the signatures of both parties (but does not
expressly require it), the law considers it to bind both parties when the non-signing party accepts
it.” Id. The question was whether Moody sufficiently manifested its assent to be bound. The
court said that the evidence was clear that Moody had manifested its assent, giving four reasons
for this conclusion: (1) the agents told Mr. Huestis they did not need to sign the contract, which
the court interpreted as indicating to Mr. Huestis that they had already agreed; (2) the agents
themselves had drafted the contract language; (3) the agents began to perform under the contract
by showing Mr. Huestis an unlisted farm; and (4) subsequent telephone calls confirmed that the
agreement was valid. Id. at 675–76.
Huestis does not stand for the proposition that a valid contract is always formed once the
drafting party receives an executed copy of the contract from the other party, even if the drafter
has not signed it. Rather, the question in Huestis, as here, was whether the nonsigning party had
otherwise evidenced mutual assent. Huestis does show, however, that, even in the absence of a
signature, the nonsigning party’s conduct can establish mutual assent. See also Murray v. Grissim,
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290 S.W.2d 888, 890 (Tenn. Ct. App. 1956) (“While a contract (offer and acceptance) is usually
expressed in words, it may be implied from conduct.”).
Kutite argues that, just like in Huestis, the parties’ conduct here shows mutual assent to the
terms of the contract. There is no dispute that from early October 2012 until early February 2013,
the parties operated under the terms of the contract.7 Kutite operated the store, bought gas from
Excell, and paid rent, all as set forth in the terms of the agreements. While this conduct, standing
alone, might suggest that the parties were conducting themselves as if they had reached an
agreement, it is not the whole story.
We begin by noting that, although the parties vehemently dispute whether their conduct
amounted to mutual assent to the terms of the agreement, they largely do not contest the underlying
facts. And in Tennessee, where no genuine issues of material fact exist, “[t]he determination of
whether a contract has been formed is a question of law.” German v. Ford, 300 S.W.3d 692, 701
(Tenn. Ct. App. 2009); see also Jones v. LeMoyne-Owen College, 308 S.W.3d 894, 904–06 (Tenn.
Ct. App. 2009) (affirming in part grant of summary judgment on a breach of contract claim because
“the parties’ undisputed conduct and the surrounding circumstances in this case . . . show a lack of
mutual assent”).
As noted previously, on October 2, 2012, Clink told Kutite that there was no agreement
until he signed the ATM Agreement. Yet, despite knowing that the defendants had hinged their
approval of the agreement on his signing the ATM Agreement, Kutite declined to sign it, and
instead entered into an agreement with another ATM company. Kutite testified that on November
7
In February 2013, after Kutite filed this suit but before the defendants removed it to the United
States District Court, the state court granted a temporary restraining order that required the parties
to operate under the lease agreement. Even if the parties had been willingly operating under the
lease agreement for the first seventeen weeks, as of February 8, 2013, they were operating under
the lease agreement by court order.
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2, he had a phone call with Benjamin Smith, in which Smith told him “bottom line is if you didn’t
sign the ATM Agreement, we’re going to kick you out of . . . the store.” And then on November
7, Fawbush told Kutite that the defendants were still holding the documents until he signed the
ATM Agreement.
Kutite also testified that he was told many times by a Majors Management field
representative that he has “no right to be in the store” and that “this is not your store. Why are you
here? They’re going to kick you out either/or they make a default against you. You have to get
out of here.” In addition, Kutite acknowledged that even as of January 2013, the defendants did
not see him as a tenant: letters regarding the business were sent, not to Kutite, but to the Assignors.
He explained: “They didn’t send [the invoice] to me. Again, they sent it to [the Assignors] because
I will keep saying they don’t consider me a tenant so they don’t communicate with me.” He further
testified: “I was operating the premises, but again the Landlord doesn’t consider me a tenant.
They consider me, I’m just an employee or just someone illegal to be on the premises. He has to
leave the premises. That’s what I’ve been told many times.” Kutite acknowledged that as of the
end of January 2013, he had no lease agreement and that the defendants wanted him off the
premises.
If the defendants wanted Kutite off the premises, why then were they selling him fuel and
letting him remain in the store? Smith explained that the rationale was two-fold. According to
Smith, the defendants at first hoped they could work the issue out amicably, and that either “[the
Assignors] or through our own efforts that we could get him to change his mind [about the ATM
Agreement].” But when it became clear that Kutite would not sign the ATM Agreement and that
no final agreement would be reached between the parties, Smith explained that the issue of
removing Kutite from the premises was difficult. Indeed, according to Smith, the original lease
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agreement was still in place because there had been no valid assignment to Kutite. Smith testified
that the Assignors were reluctant to take back the store and that even if they would, they could not
take possession of the store with Kutite operating it. Smith further explained why the defendants
operated under the terms of the lease agreement, despite wanting Kutite off the premises: “[O]ur
course of conduct on a daily basis is based on the written agreement. So to the extent one doesn’t
have a written agreement, which I don’t believe he did, we don’t really know how to act other than
what our normal agreement said.” Smith agreed with the district court that “as the months went
by, it was basically a month-to-month agreement based on the written agreements.”
Although we question the defendants’ treatment of Kutite throughout this process, we
cannot say that, under the law, the parties’ conduct amounted to mutual assent to the terms of the
contract. See Staubach Retail, 160 S.W.3d at 524. Even though the parties willingly operated
under the terms of the contract for seventeen weeks, at all times the defendants made known to
Kutite that there was no finalized agreement in place and that he could not remain on the premises
unless he signed the ATM Agreement. Kutite never signed the ATM Agreement; accordingly, the
parties never reached a final agreement on contract terms.
For these reasons, we conclude that no enforceable contract existed between Kutite and the
defendants. The district court, therefore, did not err in granting judgment to the defendants on
Kutite’s breach of contract claim.
Estoppel. Kutite argues that even if there was not an enforceable contract, promissory
estoppel should prevent the defendants from claiming that no contract existed.8 The Tennessee
Supreme Court explains “promissory estoppel” as follows: “‘A promise which the promisor
8
We decline to discuss equitable estoppel, which Kutite mentions only briefly on appeal; Kutite
has not meaningfully pursued this claim at any step of the way.
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should reasonably expect to induce action or forbearance of a definite and substantial character on
the part of the promisee and which does induce such action or forbearance is binding if injustice
can be avoided only by enforcement of the promise.’” Alden v. Presley, 637 S.W.2d 862, 864
(Tenn. 1982) (quoting Restatement of Contracts § 90). But “‘[n]o injustice results in refusal to
enforce a gratuitous promise where the loss suffered in reliance is negligible, nor where the
promissee’s action in reliance was unreasonable or unjustified by the promise.’” Id. (quoting
L. Simpson, Law of Contracts § 61 (2d ed. 1965)).
The limits of promissory estoppel are: (1) the detriment suffered in reliance must
be substantial in an economic sense; (2) the substantial loss to the promisee in
acting in reliance must have been foreseeable by the promisor; (3) the promisee
must have acted reasonabl[y] in justifiable reliance on the promise as made.
Id. (quoting Simpson at § 61). Generally, Tennessee courts disfavor estoppel. See Rogers v.
Colville, 238 S.W. 80, 83 (Tenn. 1922) (“Estoppels are not favored in the law.”).
Kutite makes two arguments in favor of his promissory estoppel claim. First, he contends
that Hewatt’s approving him to purchase the store after conducting credit and background checks
was a promise on which he relied to believe that an agreement had been reached. We do not doubt
that being preapproved to purchase the store could have led Kutite to believe that he would
ultimately reach an agreement with the defendants. But Kutite could not reasonably have believed
that the successful credit and background checks constituted either a final agreement with the
defendants, or a promise that the defendants would allow Kutite to operate the store without further
conditions. See Alden, 637 S.W.2d at 864. The Agreement and Bill of Sale between the Assignors
and Kutite, which Kutite signed after the preapproval process, conditioned the agreement “upon
final approval of the sub-lease from Sellers to Buyer by [the defendants].” Therefore, despite the
preapproval process, Kutite was on notice that final approval by the defendants was still a
prerequisite to the completion of the agreement.
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Kutite alternatively argues that the defendants’ sending of the five documents to Kutite on
September 27, 2012, constituted the promise. He states in his complaint that “[i]n reliance upon
representations from the legal department including the five agreements . . . , Plaintiffs paid
Assignors $50,000 in September 2012 for the good will value of the store, Plaintiffs executed a
$33,575.00 promissory note for the inventory and stock in the Store, and Plaintiffs paid Assignors
$55,601.95 on October 8, 2012.” In addition, Kutite complains that he relied upon the Assignment
Documents, which did not include any mention of an ATM Agreement, when executing an
Equipment Finance Lease Agreement for a new ATM on October 15, 2012.
We note, however, that some of the actions Kutite claims to have taken in reliance on the
promise occurred before the alleged promise was made—that is, before Majors Management sent
the documents to Kutite on September 27, 2012. These include his entering into the Agreement
and Bill of Sale with the Assignors on September 6, 2012, and his $25,000 payment for good will
around that time. Moreover, it is unclear how Majors Management’s actions on September 27,
2012, could be considered a promise upon which Kutite could have reasonably relied. Not only
were the Lease Agreement, the Fuel Supply Agreement, and the Assignment of Agreements each
contingent upon final approval by the defendants, but the email to Kutite also explicitly
conditioned the defendants’ acceptance of the agreement upon further action by the defendants:
“Once Scott Moon signs, we will send you and the assignor a copy of the Assignment of
Agreements.” Based on this email, Kutite should have known that returning the signed documents
to Majors Management was not the final step.
This dovetails into the final problem we see with Kutite’s argument—Kutite’s reliance on
any alleged promise was unreasonable. See Alden, 637 S.W.2d at 864. Without a signed document
in his hands, or any indication of assent from the defendants, he began operating the store on
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October 2, 2012. And that very day he was put on notice that there was a problem—the defendants
would not finalize the assignment absent his signature on the ATM Agreement. Yet, two days
later, with notice that the defendants, at least, did not consider the agreement final, he executed an
Amendment to Agreement and Bill of Sale promising to secure a promissory note to pay the
Assignors for the remaining fuel. Then, on October 8, he paid the Assignors $55,601.95, despite
having been told 6 days earlier that the defendants did not consider the assignment finalized. And
on October 15, 2012, despite knowing that the defendants were claiming the lack of a finalized
agreement, and that the wrench was the ATM Agreement, Kutite entered into an agreement to use
another company’s ATM. As the district court stated, Kutite operated at his own risk, despite
many red flags telling him that the transaction had not been finalized. For these reasons, we find
any reliance on alleged promises unreasonable; Kutite’s promissory estoppel claim, therefore,
fails. See Alden, 637 S.W.2d at 864.9
9
Kutite also argues that the defendants should be judicially estopped from arguing that there was
no written, signed contract, contending that the defendants had previously sought to enforce a long-
term agreement against Kutite in a prior proceeding. We are left to our own devices to determine
the contours of the judicial estoppel claim. We know only that on September 24, 2013, after Kutite
had begun running the store, the defendants filed for a Forcible Entry and Detainer Civil Warrant
(FED Matter) against Kutite in the Shelby County Court of General Sessions, seeking money
damages and his removal from the property. The alleged damages were based on items listed in
an unpaid tenant ledger. According to the defendants, “the Civil Warrant does not make any
reference to a lease agreement and there were no substantive proceedings on the FED Matter in
the Court of General Sessions, which is not a court of record and which never issued any ruling.
[Defendants] on November 6, 2014 voluntarily dismissed the FED Matter.” We can only assume
this is true because Kutite offers no evidence, or argument, to the contrary. Indeed, Kutite’s
cursory treatment of this issue, and his failure to provide us with sufficient information regarding
the prior matter, renders us unable to review the issue; he has, therefore, forfeited it. See United
States v. Johnson, 440 F.3d 832, 846 (6th Cir. 2006). In any event, there is no evidence that the
defendants actually asserted a contradictory position in the FED matter or that the Court of General
Sessions adopted that contradictory position, thus rendering judicial estoppel inapplicable.
See Lorillard Tobacco Co. v. Chester, Willcox & Saxbe, 546 F.3d 752, 757 (6th Cir. 2008)
(“The doctrine of judicial estoppel bars a party from (1) asserting a position that is contrary to one
that the party has asserted under oath in a prior proceeding, where (2) the prior court adopted the
contrary position either as a preliminary matter or as part of a final disposition.” (quotation marks
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Punitive Damages. Finally, Kutite challenges the district court’s decision that he was not
entitled to punitive damages. Because Kutite’s breach of contract and estoppel claims fail, we
need not discuss Kutite’s challenge to the availability of punitive damages.
***
We AFFIRM the judgment of the district court in favor of the defendants.
omitted)); see also Watkins v. Bailey, 484 F. App’x 18, 20 n.1 (6th Cir. 2012) (“[T]his court has
held that, even in diversity actions like this one, federal law rather than state law governs
application of [judicial estoppel] in the federal courts.” (citation omitted)).
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HELENE N. WHITE, Circuit Judge, concurring in part and dissenting in part. I agree with
my colleagues to affirm the grant of summary judgment on Kutite’s breach-of-contract claim.
I respectfully dissent regarding Kutite’s promissory-estoppel claim. As the majority notes,
Defendants’ Field Representative Karl House told Kutite that Kutite could place an ATM of his
own choosing in the store. Defendants could have, but did not, correct that misrepresentation
before the Assignment of Agreements were to take effect on October 1, 2012. Neither the ATM
agreement nor any reference to an ATM agreement was included in the Assignment Documents
Defendants emailed Kutite on September 27, 2012, which Kutite signed and returned to
Defendants on September 28, 2012. It was only after the Assignment of Agreements were to take
effect on October 1, 2012, and after Kutite began operating the store that Defendants first raised
the ATM agreement.
Defendants’ failure to mention the ATM agreement or include it in the Assignment
Documents, and later insistence that it be signed after the fact, are even more egregious given that
the ATM agreement, which was between the assignors and Tennessee Management, had a ten-
year term and gave Tennessee Management the option to renew the agreement for two terms of
five years. And, in the event of a breach by the assignor tenant, recourse was against the assignors,
not Defendants.
The majority concludes that Kutite’s reliance on any alleged promise was unreasonable
because he began operating the store “without a signed document in his hands.” (Maj. Op. at 18.)
But it was Defendants that sprang the ATM agreement on Kutite only after he had returned the
signed documents as directed and had begun operating the store on October 2, 2012; the package
that Defendants presented to Kutite for signature before he began operating the store did not
include an ATM agreement. Further, there is evidence that Defendants’ manager Scott Moon did
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in fact sign the Assignment Documents, and, as the district court noted, “even Defendants sought
to enforce [against Kutite] a forum selection clause found within the agreement.” (R. 25, PID
472.) Under these circumstances and viewing the evidence in the light most favorable to Kutite,
a reasonable jury could find that Kutite reasonably relied on Defendants’ representations, including
Karl House’s representation that Kutite could install an ATM of his own choosing in the store,
signed the documents and began operating the store. Kutite suffered substantial economic
detriment in reliance, and that reliance was foreseeable to Defendants.
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