Apg, Inc. v. Mci Telecommunications Corp.

Decision Date08 February 2006
Docket NumberNo. 02-1120.,02-1120.
Citation436 F.3d 294
PartiesAPG, INC., Plaintiff, Appellant, v. MCI TELECOMMUNICATIONS CORPORATION, Defendant, Appellee.
CourtU.S. Court of Appeals — First Circuit

Howard B. Klein, with whom Mark B. Decof and Decof & Decof, P.C., were on brief, for appellant.

Mark A. Berthiaume, with whom Louis J. Scerra, Jr., Marc DeSisto, Schnader Harrison Goldstein & Manello, and DeSisto Law were on brief, for appellee.

Before TORRUELLA, Circuit Judge, COFFIN, Senior Circuit Judge, and HOWARD, Circuit Judge.

COFFIN, Senior Circuit Judge.

In early 1997, appellant APG, Inc., acting as a middleman, initiated discussions with CVS Corp. ("CVS"), the national drug store chain, in an effort to persuade CVS to buy, for re-sale in its stores, prepaid telephone cards provided by MCI Telecommunications Corp. ("MCI"). Ultimately, CVS and MCI bypassed APG; CVS contracted directly with MCI to buy thousands of prepaid cards annually. In this diversity action, APG claims that MCI deceitfully closed the deal on its own at the last minute, taking advantage of APG's efforts and unfairly depriving the small company of commissions. APG's complaint sought damages on both tort and contract theories. The district court granted summary judgment in favor of MCI on the tort claims and later granted judgment as a matter of law on the contract claim. Asked to review each of those dispositions, we have carefully examined the record and relevant law. Although we agree that the district court properly dismissed most of the claims, we conclude that the facts of record thus far, viewed in appellant's favor, leave open the possibility of liability on a theory of unjust enrichment. We therefore remand for further proceedings on that issue.

I. Factual Background

We draw the facts from the depositions and other materials contained in the summary judgment record, as well as from the testimony adduced during the trial on the contract claim, and recount them in the light most favorable to appellant. See Burton v. Town of Littleton, 426 F.3d 9, 14 (1st Cir.2005); González-Piña v. Rodríguez, 407 F.3d 425, 431 (1st Cir.2005).1

Appellant APG is a small family business that was incorporated in the mid-1990s by Jordan Rice, a resident of Florida. The company was involved primarily in the sale of automobiles before Rice's son, Steven, joined the company as vice president in late 1996 and decided to explore adding the sale of prepaid telephone cards to the company's other activities. He was referred by an MCI representative to Conserv Corp. ("Conserv"), one of a number of third-party distributors that purchased MCI prepaid cards for re-sale. Typically in MCI's prepaid sales department, such independent distributors pursue sales to smaller businesses, while larger potential accounts — the "top 200" or so companies — are handled directly by MCI's own sales staff. On occasion, when a distributor has special access to one of the large companies through a personal contact, MCI will pursue that account through the distributor.

Steven Rice and his brother, Robert, APG's president, had just such a connection to offer Conserv: their mother, Janice, was an old friend of CVS's president and CEO, Stanley Goldstein. Steven Rice proposed that APG serve as a sub-distributor or sub-agent of Conserv for the sale of MCI prepaid cards, with commissions to be paid when Rice linked Conserv with his "retail contacts." APG and Conserv subsequently entered into a "Non-Circumvention/Non-Disclosure Sales Agreement" specifically with respect to the sale of prepaid telephone cards to CVS. Dated January 16, 1997, the agreement provided that Conserv would not "circumvent, avoid, or bypass APG either directly or indirectly, to avoid payment of fees or commissions or other benefits to APG...."

About a week after the two companies signed the agreement, Steven Rice spoke with the CVS buyer responsible for prepaid cards, Janice Jacobs, and scheduled a meeting at CVS headquarters to discuss CVS's possible purchase of MCI prepaid cards. An assistant to Goldstein had called Jacobs and requested that she speak with Rice about the telephone cards following a phone conversation between Janice Rice and her old friend. In attendance at the meeting, which took place on January 29, were Jacobs, Rice, Conserv's vice president Jim Vinci, and Cindy Isaacs, an MCI prepaid agent manager. As an agent manager, Isaac, an MCI employee, helped her assigned distributors sell MCI prepaid cards, and Vinci had asked her to attend the meeting to support Conserv and APG.

Rice and Vinci had prepared a written proposal for CVS using a "Power Point" format that MCI had provided and, at the meeting, Isaacs made a presentation about MCI prepaid cards that included assurances that Conserv could meet CVS's needs, supported by MCI and its technical staff. A number of follow-up conversations took place, including one in which Robert Rice assured Jacobs that "dealing with us at Conserv was like dealing with MCI directly."

In March, Jacobs sent Vinci a letter stating that CVS was putting the prepaid program on hold until mid-August and that she would contact him again when the program became active. In a phone conversation with Vinci, Jacobs attributed the delay to CVS's pending merger with Revco. In late April, however, Jacobs called Vinci to request additional information about Conserv's bid. Her call triggered a flurry of activity: Vinci called Isaacs to obtain answers to some of the questions Jacobs had raised; Vinci notified APG of the renewed contact; and, after Vinci's call to her, Isaacs sent an email to Mary McGann, MCI's in-house sales manager, to give her "a heads-up" about CVS's apparently imminent plan to choose a prepaid provider. The email reported that Jacobs had identified four companies "in the running for the deal," including Conserv, and Isaacs noted that none was a major carrier. The email also detailed the information that CVS was seeking from Conserv.

Isaacs' email is pivotal to appellant's claims in this case. APG maintains that it was this email that put MCI's direct sales division on notice of CVS's impending purchase of prepaid cards and prompted that division to step in and appropriate the sales opportunity developed by Conserv and APG. Although the immediacy of CVS's intent to choose a provider apparently was news to MCI, the record shows that, prior to Isaacs' email, MCI's direct sales team had taken steps toward marketing prepaid cards to CVS, which already was a high-volume customer of MCI's regular long-distance service. The record contains a draft of a letter from an MCI national accounts manager, dated March 24, 1997, and a series of emails among MCI executives dated April 7 and 8, which contain references to the marketing of prepaid services to CVS. In another series of emails sent on April 21 — four days before Isaacs' email — McGann and others involved with direct sales made comments that indicated that MCI was moving ahead with a direct pursuit of CVS's prepaid business. Indeed, in her reply to Isaacs, McGann noted that "[w]e have had high level meetings with this account," including a dinner meeting "the other night" with a merchandising executive, and she observed that "Janice [Jacobs] seems to be going down a different path." Isaacs herself had referred in her email to the direct sales department's relationship with CVS, stating that "I know that CVS is on your list."

Despite this internal discussion about MCI's direct interest, Isaacs continued to support Conserv's efforts to secure the account, and it appears that neither Conserv nor APG was aware of any separate dealings by MCI to make a direct sale. A few days after Vinci's phone conversation with Jacobs, he sent a letter answering her questions and offering marketing funds and promotional materials that, in relevant part, Isaacs had approved. In mid-May, in response to Jacobs' inquiry about a test program for prepaid cards, Steven Rice sent a letter outlining the specifics of such a program — again offered with Isaacs' approval. On May 16, APG and Conserv entered into a second contract — a "Sub-Distributor/Agent Agreement" — in which APG was to receive a specified commission for each "unit" of prepaid calling time purchased by CVS.

The exchange of inquiries and information between Conserv/APG and CVS was not the only indicator that CVS was becoming increasingly focused on the Conserv proposal. Both Rice brothers had conversations in mid-May with Helena Foulkes, CVS's vice president and merchandising manager, who told them that Conserv was one of two or three companies under consideration.

Meanwhile, MCI's direct sales team was jumping into the competition with both feet. Ray Richards, an in-house MCI prepaid account executive, spoke with Jacobs on May 14 and was told that, if MCI wanted to be involved directly, CVS must have a proposal to review by Friday, May 16.2 In an email message to McGann, his supervisor, after the phone conversation with Jacobs, Richards reported that Jacobs had asked if CVS would receive the same support from MCI if the business came through a distributor. In his deposition, Richards acknowledged telling Jacobs that "CVS would be better served if they were to deal directly with MCI" because of the technical complexity of the program.

Richards spent two days preparing a proposal, which he cleared with McGann and then hand-delivered on Friday, May 16. He met with Jacobs and Foulkes that day, submitted a revised proposal by fax on the following Monday, and continued discussions through the week. Jacobs called Richards to verbally accept the MCI proposal a week or two later. MCI and CVS entered into a written agreement on September 2 providing for the sale of MCI prepaid cards in CVS stores. After the Rices unsuccessfully asserted their right to receive commissions on the CVS deal through various communications with MCI and...

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