374 F.3d 23 (1st Cir. 2004), 03-1406, Alternative System Concepts, Inc. v. Synopsys, Inc.

Docket Nº:03-1406.
Citation:374 F.3d 23
Party Name:ALTERNATIVE SYSTEM CONCEPTS, INC., Plaintiff, Appellant, v. SYNOPSYS, INC., Successor to Language for Design Automation, Inc., Defendant, Appellee.
Case Date:July 07, 2004
Court:United States Courts of Appeals, Court of Appeals for the First Circuit
 
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374 F.3d 23 (1st Cir. 2004)

ALTERNATIVE SYSTEM CONCEPTS, INC., Plaintiff, Appellant,

v.

SYNOPSYS, INC., Successor to Language for Design Automation, Inc., Defendant, Appellee.

No. 03-1406.

United States Court of Appeals, First Circuit

July 7, 2004

Heard May 4, 2004.

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[Copyrighted Material Omitted]

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John P. Griffith, with whom Griffith & Associates, PLLC was on brief, for appellant.

Chris Scott Graham, with whom Grace E. Jo and Dechert LLP were on brief, for appellee.

Before SELYA, Circuit Judge, CYR, Senior Circuit Judge, and LIPEZ, Circuit Judge.

SELYA, Circuit Judge.

This is a case of a suitor scorned. Plaintiff-appellant Alternative System Concepts, Inc. (ASC) courted Language for Design Automation, Inc. (LEDA) and forged a short-term distribution relationship. As the couple moved toward a more durable

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bond, defendant-appellee Synopsys, Inc. acquired LEDA and dashed ASC's hopes.

The jilted suitor responded aggressively, haling Synopsys into court and claiming, inter alia, misrepresentation and breach of promise. The district court dismissed the former claim early in the proceedings and subsequently granted summary judgment for Synopsys on the latter. ASC appeals. After addressing a number of issues (including an issue of first impression in this circuit concerning judicial estoppel), we affirm.

I. BACKGROUND

We rehearse the facts in the light most favorable to the nonmoving party (here, ASC) and draw all reasonable inferences in that party's favor. Because there are differences between the ground rules that apply to motions to dismiss as opposed to motions for summary judgment, compare Chongris v. Bd. of Appeals, 811 F.2d 36, 37 (1st Cir. 1987) (explaining that the factual averments contained in the plaintiff's complaint supply the template for review of a decision granting a Rule 12(b)(6) motion to dismiss), with Garside v. Osco Drug, Inc., 895 F.2d 46, 48 (1st Cir. 1990) (explaining that the evidence of record supplies the template for review of a decision granting a Rule 56 motion for summary judgment), we adjust for those differences in our ensuing discussion of the district court's rulings.

ASC is a New Hampshire corporation involved in the design and marketing of programs used in the production of computer chips. On March 29, 1999, it entered into a letter of understanding (the LOU) with LEDA, a French software designer. In the LOU, LEDA appointed ASC as the exclusive distributor of its Proton product line in the United States for a six-month term commencing April 1, 1999. The parties further declared that they would attempt to "negotiate in good faith a permanent agreement based on experiences during the term of th[e] LOU." That declaration was purely aspirational; the LOU stated expressly that neither party had any obligation to enter such a permanent agreement.

During the next six months, the two firms engaged in sporadic negotiations. On September 1, 1999, their representatives met in France in hopes of hammering out the details of a permanent arrangement. Although LEDA's managing director assured ASC that "all was satisfactory with regard to a permanent agreement," the parties neither developed nor signed a written contract. Later that month, the parties exchanged e-mails that apparently extended the geographic coverage of the LOU to Canada.

Talks continued past the LOU's expiration date (September 30, 1999). On October 5, representatives of the two companies met in Florida. LEDA agreed to extend the LOU for a reasonable time pending the completion of negotiations. It also notified a prospective customer that ASC remained the exclusive distributor of LEDA products in the United States and Canada. ASC claims that the parties had by then substantially agreed on the key terms of a permanent distribution relationship, but the fact remains that LEDA balked at signing such an agreement.

In January of 2000, Synopsys (a California-based competitor of ASC) acquired LEDA. It promptly terminated the interim distribution agreement and broke off the negotiations for a permanent relationship. ASC was left out in the cold.

ASC lost little time in bringing this diversity action against Synopsys in New Hampshire's federal district court. See 28 U.S.C. § 1332(a). Its first amended complaint charged that LEDA had been derelict

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in its duty to negotiate a permanent distribution agreement in good faith; that LEDA had intentionally misrepresented the nature of its interactions with Synopsys; that LEDA had flouted an implied covenant of good faith and fair dealing; and that Synopsys bore responsibility for these transgressions as LEDA's successor in interest. Finally, the first amended complaint charged Synopsys, in its own right, with having interfered with ASC's advantageous contractual relations.

Synopsys moved to jettison the complaint for failure to state claims upon which relief could be granted. See Fed.R.Civ.P. 12(b)(6). On August 2, 2001, the district court dismissed the misrepresentation claim on the ground that ASC had not pleaded misrepresentation with the requisite particularity. ASC v. Synopsys, Inc., No. 00-546, 2001 WL 920029, at *2 (D.N.H. Aug.2, 2001) (ASC I). Nevertheless, the court refused to dismiss the breach of contract claim. See id. A period of protracted pretrial discovery commenced. Eighteen months later, the district court granted Synopsys's motion for summary judgment on the breach of contract count. 1 ASC v. Synopsys, Inc., No. 00-546, 2003 WL 358737, at *3 (D.N.H. Feb.19, 2003) (ASC II). That ended the suit and precipitated this appeal.

In order to put the arguments on appeal into workable perspective, we pause to provide additional detail anent the lower court's treatment of ASC's breach of contract claim. Count I of the first amended complaint alleged that "Synopsys/LEDA breached its agreement to negotiate a permanent agreement in good faith and to honor the Canadian distributorship." In support of its motion to dismiss, Synopsys argued in relevant part that, to the extent this claim was premised on an oral contract entered into between the parties following the execution of the LOU, it was barred by the statute of frauds. See N.H.Rev.Stat. Ann. § 506:2 (providing that "[n]o action shall be brought ... upon any agreement ... that is not to be performed within one year from the time of making it, unless such ... agreement ... is in writing"). In its opposition, ASC clarified that it was "not claiming that [LEDA/Synopsys] breached an agreement to enter into a long term contract." Rather, its breach of contract claim was "that LEDA breached its agreement to negotiate in good faith" as required by the LOU.

The district court took ASC at its word. Noting that ASC had explicitly abandoned any claim that the parties had entered a subsequent oral agreement, the court treated ASC's cause of action as one "that LEDA breached its contractual obligation to make a good faith effort to negotiate a permanent marketing agreement that initially covered the United States and later was amended to include Canada." ASC I, 2001 WL 920029, at *2 n. 2. Since the court tentatively deemed the statute of frauds impuissant to defeat this cause of action, it denied the motion to dismiss the breach of contract count. Id. at *2.

By the time that discovery had run its course and the parties had gotten around to filing cross-motions for summary judgment, ASC had experienced an epiphany. In its summary judgment papers, it alleged that on October 5, 1999, the parties entered into an oral distribution agreement covering the United States and Canada. It also averred that LEDA/Synopsys subsequently breached this permanent arrangement. Synopsys vociferously objected to this changed tune. It maintained

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that this approach evinced a new and inconsistent theory; that, throughout the litigation, ASC had construed its breach of contract claim as a claim for breach of a duty to negotiate in good faith; and that this tergiversation resulted in a theory that fell outside the purview of the first amended complaint.

The district court agreed with Synopsys's assessment. It invoked the doctrine of judicial estoppel, pointing out that ASC had obtained an "advantage by contending in opposition to Synopsys's motion to dismiss that its breach of contract claim was premised on an alleged breach of the LOU, rather than a subsequent oral agreement to make the LOU permanent." ASC II, 2003 WL 358737, at *3. Accordingly, the court held that ASC was barred from advancing a contradictory position on summary judgment. Id. The court thereupon granted brevis dispositon in favor of Synopsys.

On appeal, ASC contends that the lower court erred in (i) dismissing its misrepresentation claim, (ii) refusing to allow a further amended complaint designed to cure defects in the misrepresentation count, and (iii) invoking the doctrine of judicial estoppel to bar the breach of contract claim that it wished to propound on summary judgment. 2 Synopsys, by motion, asks us to (i) dismiss the appeal, and (ii) award sanctions against ASC. We address these points below, starting with Synopsys's motion to dismiss, then confronting ASC's asseverational array, and ending with a consideration of the request for sanctions.

II. THE MOTION TO DISMISS THE APPEAL

While this case was pending in the district court, Synopsys filed a California state court action accusing ASC of conspiracy and unfair business practices. On April 1, 2003--shortly after the institution of this appeal--the parties reached at least a tentative settlement in the California action. There is some indication that the terms of the settlement contemplated the dismissal of the earlier (New Hampshire) action. After Synopsys encountered...

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