Pft Roberson, Inc. v. Volvo Trucks North America, 04-3100.

• Citation: 420 F.3d 728
• Decision Date: 25 August 2005
• Docket Number: No. 04-3100.,No. 04-3877.,No. 04-3232.,No. 04-3841.,04-3100.,04-3232.,04-3841.,04-3877.
• Parties: PFT ROBERSON, INC., Plaintiff-Appellee, Cross-Appellant, v. VOLVO TRUCKS NORTH AMERICA, INC., and Volvo Transportation Services, N.A., Inc., Defendants-Appellants, Cross-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

420 F.3d 728

PFT ROBERSON, INC., Plaintiff-Appellee, Cross-Appellant, v. VOLVO TRUCKS NORTH AMERICA, INC., and Volvo Transportation Services, N.A., Inc., Defendants-Appellants, Cross-Appellees.

No. 04-3100.

No. 04-3232.

No. 04-3841.

No. 04-3877.

United States Court of Appeals, Seventh Circuit.

Argued May 2, 2005.

Decided August 25, 2005.

Steven H. Hoeft (argued), McDermott, Will & Emery, Chicago, IL, Jeffrey W. Tock, Harrington, Tock & Royse, Champaign, IL, for Plaintiff-Appellee, Cross-Appellant.

Wayne F. Plaza (argued), Charles A. LeMoine, Rooks Pitts, Robert K. Villa, Dykema Gossett, Chicago, IL, for Defendants-Appellants, Cross-Appellees.

Before BAUER, EASTERBROOK, and EVANS, Circuit Judges.

EASTERBROOK, Circuit Judge.

PFT Roberson operates a fleet of more than 1,200 long-haul trucks and trailers. Freightliner supplies, maintains, and repairs Roberson's vehicles under a fleet agreement. A "fleet agreement" is a comprehensive contract (or series of contracts) specifying the number of trucks, the price of each, how much maintenance costs per mile (a fee that increases as a truck ages and becomes more subject to breakdowns), trade-in and other repurchase details when trucks reach the end of their useful lives, and provisions for winding up the arrangement (the "exit clause"). Exit may be complex, for it can entail early and large-scale replacements, repurchases, or swaps of used trucks, as well as disputes about cause and penalties.

Late in 2001 Freightliner sent Roberson a termination notice, which activated the exit clause. Litigation erupted when the parties could not agree on how it worked; mean-while Roberson went shopping for another supplier and approached Volvo. The parties discussed a multi-year, $84 million arrangement for the purchase and maintenance of new Volvo trucks plus the trade-in or repair of used Freightliner trucks and trailers that Freightliner did not repurchase. Lengthy drafts were exchanged from November 2001 until late January 2002. Many "Master Agreements" were drafted; none was signed.

In March 2002 Roberson and Freightliner patched up their differences, settled the lawsuit, and extended their fleet agreement. Roberson then sued Volvo for breach of contract and fraud. According to Roberson, an email containing 572 words is the contract that Volvo breached, and the fraud consists in Volvo's efforts to negotiate additional or revised terms after sending the email. Volvo's email, dated December 6, 2001, and captioned "Confirmation of our conversation", recaps the negotiations' status. It identifies items that Roberson and Volvo had "come to agreement on" and others that the parties needed to "review and finalize."

Although the email states that the contract would be complete only when these other subjects had been resolved and the package approved by senior managers, the district judge held that a jury could find that the email constituted Volvo's assent to the items it mentioned even if a full fleet agreement had not been signed. At the trial, the judge allowed Roberson's managers to testify that they felt they had an agreement with Volvo. (The objection, which the district judge rejected, was that only words exchanged between the parties could create a contract and that private thoughts are irrelevant.) The jury awarded Roberson more than $5 million in damages for breach of contract. Volvo appeals the district court's denial of its motion for judgment as a matter of law under Fed.R.Civ.P. 50 and contends that it is entitled to a new trial if we reject this position. Roberson has filed a cross-appeal in pursuit of damages on its fraud theory, which the district judge did not submit to the jury.

According to the email, the parties "have come to agreement on" the number of new Volvo trucks that Roberson will purchase, the cost per mile of servicing the new trucks and some of the Freightliner trucks, and an outline of an exit clause. They had not agreed on the price per truck, on the cost per mile for all of the older trucks, on the repurchase and trade-in terms for older trucks, or on the details of the exit clause — and recall that the devil was in these details for the arrangement between Roberson and Freightliner. Roberson had not bound itself to buy a single truck; it wants to treat the email as granting it a unilateral option. No reasonable jury could conclude that the items covered in the email were independent bargains to which Volvo had bound itself. The parties were negotiating a comprehensive arrangement, not a series of stand-alone contracts. The email was not something to which Roberson could respond "I accept" and move from the negotiation to the performance stage. Nor did Roberson say "I accept" or any equivalent; the parties negotiated for another two months, and when Volvo submitted its comprehensive proposal (at least 100 times longer than the email), Roberson refused to sign.

True enough, as Roberson stresses, truck purchases can be separated from truck maintenance, and in principle many subjects could be resolved one at a time. If people choose to negotiate and agree item by item, that is their privilege. But that is not what these negotiators were doing, and the email was not an à la carte menu from which Roberson could check off the items it wanted. The email and the other writings these parties exchanged show that the negotiations were global and that Volvo wanted a complete and formal arrangement before being bound. Such caution is to be expected in a multi-million-dollar deal that would last for many years. See Central Illinois Light Co. v. Consolidation Coal Co., 349 F.3d 488, 492 (7th Cir.2003); Mays v. Trump Indiana, Inc., 255 F.3d 351, 358 (7th Cir.2001); Skycom Corp. v. Telstar Corp., 813 F.2d 810, 815-16 (7th Cir.1987). Here, each item that Roberson and Volvo "have come to agreement on" corresponds to a missing yet required document:

• Termination clause. The email contains some elements of exit arrangements but also states that Volvo must later "provide an exit clause" and that the parties need to "review and finalize" a master agreement "w/exit clause." In later drafts, the parties haggled over whether termination would be allowed at will or only for cause (a question on which the email was silent), and what penalties the party invoking the exit right must pay the other. These particulars were vital in light of the fight between Roberson and Freightliner about precisely such details.

• Truck purchases. According to the email Roberson would purchase at least 811 new Volvo trucks, yet a purchase order or similar recitation would be required to bind Roberson to this provision (Volvo would not allow itself to be bound without a reciprocal commitment), and that was not possible until the parties agreed on the trucks' price, trade-in value, purchase and delivery schedule, and buyer and seller's remedies in case of breach, none of which the email covered.

• Maintenance cost per mile. According to the email, Volvo had agreed to maintain Roberson's trucks for a specified cost per mile, but the email added that the parties still needed to reach a "Master CPM [cost-per-mile] agreement" and approve specification sheets to catalog the preexisting damage and condition of each Roberson truck. Drafts of a "Proposed Master CPM agreement" addressed something that the email did not: the cost per mile for trucks older than three years. (Trucks become more expensive to repair over time because of wear and tear, and pennies per mile add up to millions of dollars for a big fleet in which each long-haul truck can average 150,000 miles per year.) At oral argument, Roberson contended that cost per mile could be calculated by plugging data such as manufacturer and length in service into a formula. No such formula appears in either the email or any later communication, however, and "[h]aving neither set a price, nor a mechanism to calculate a price, the draft cannot constitute a contract". Feldman v. Allegheny International Inc., 850 F.2d 1217, 1223-24 (7th Cir.1988).

• Trade-in value. A major source of Roberson's supposed damages was the generous (relative to Freightliner) trade-in allowance that Volvo offered for used trucks, yet the email makes the trade-in "subject to trade terms and conditions" derived not from industry practice but from a document containing "Volvo Trade Terms and conditions" that was never finalized.

Hundreds of pages eventually were needed to furnish these and other details. A telling fact about industry practice and business necessity is that the consummated fleet agreement between Roberson and Freightliner was of length and complexity similar to the final package that Volvo tendered to Roberson in January 2002 — and two orders of magnitude longer than the email of December 2001.

Illinois supplies the substantive law: on this, if nothing else, the parties agree. When negotiators say that agreement is subject to a more definitive document, Illinois treats this as demonstrating intent not to be bound until that document has been prepared and signed. See, e.g., Empro Manufacturing Co., Inc. v. Ball-Co Manufacturing, Inc., 870 F.2d 423, 425 (7th Cir.1989) (Illinois law); Interway, Inc. v. Alagna, 85 Ill.App.3d 1094, 41 Ill.Dec. 117, 407 N.E.2d 615 (Ill.App. 1 Dist.1980). Illinois is averse to enforcing tentative agreements that are expressly contingent on the signing of formal or final documents. See, e.g., Feldman, 850 F.2d at 1222; ...